A study conducted by the Boston College Carroll School of Management has shown that the average investor in initial coin offerings is raking in up to 82 percent profit. This is despite the disturbing reports of the frequency of scams and projects of little practical use.
The study titled “Digital Tulips? Returns to Investors in Initial Coin Offerings,” examined 4000 ICOs which together raised $12 billion at different timeframes and found that investors still made significant profits from them.
The report indicated that an average token appreciated by 179 percent after listing at an exchange. This profit was realized by holding the token for less than 20 days in most instances. The 54-page report says that even in cases in which token were not listed 60 days after the initial coin offering, average investors still managed to make some profits.
The report went on to say that even when investors waited until a coin was listed on an exchange before purchasing, they were able to make profit as high as 67 percent during the first 30 days of trading. This profit increased as the tokens are held for longer periods. Investors make profits as high as 140 percent after 90 days of token listing. Profit of 430 percent was observed to have been made after 180 percent while 1,880 percent profit was made by investors that held coins for 360 days.
The researchers admitted there were not enough data to show that the long term result held true for the average investor since most of the ICOs tracked have not been in existence for up to a year.
The study said:
“Our paper shows that ICOs investors are compensated handsomely for investing in new unproven platforms through unregulated offerings. It suggests that scams, while plentiful in number, are not as important in terms of stolen capital because investors are shrewd enough to spot (and underfund) them.”
“While our results could be an indication of bubbles, they are also consistent with high compensation for risk for investing in unproven pre-revenue platforms through unregulated offerings,” the study declared.
Hugo Benedetti, one of the researchers expressed surprise at their findings. According to him, with the many reported scams in the industry, he never thought there were many investors making that much profit off the crowdsales. However, when asked by CCN to give his long-term view of the industry, he was reluctant to do so. He had this to say:
“Well, that’s a tricky question, because nothing guarantees that the market will continue to allocate capital as proficiently as it has so far. Retrospectively, we see that even though there have been many underperformers (ICOs that list or trade below their issuance price), on average the returns to the industry have been largely positive,” he said.