Some 39,000 eth was sold by Initial Coin Offerings (ICOs) on December 11th 2018. A few days later, ◊45,000 was sent to the market on the 14th of the same month. Then ◊33,000 on the 17th.
Such huge sums became a rarity in the second half of last year, but in November and December, ◊10,000, ◊20,000 or ◊30,000+ became the order of the day.
Around mid-December, about 400,000 eth had been sold in the previous 30 days. Hundreds of thousands more followed, with estimated data based on blockchain movements showing 736,000 eth was sold since November up to February 5th.
For the first time since we kept tracking movements of eth holdings by ICOs sometime in late spring 2018, the total holdings have fallen very significantly.
Despite considerable eth liquidation for months on end, eth holdings by ICOs remained at about ◊3.3 million since summer 2018.
That finally changed recently, with it now down to ◊2.7 million without accounting EF holdings. Suggesting that while previously new ICOs kept entering the market, so negating eth sales, there have now been far less new entrants.
That 2.7 million is close to the entire amount that was sold in the past year. Santiment data shows an incredible 2,638,346 eth was sold since February 7th 2018.
Recently, however, there has been far less eth selling by ICOs. Sums like ◊800 or ◊500 a day are now far more common, with ◊1,000+ here and there, while ◊10,000 or so have become relatively rare.
That might be because the projects have perhaps secured some of the needed fiat funding, or maybe they’re just waiting for a price bounce.
DAI, The Antidote?
It could also be because DAI is rising as a potential alternative to outright selling through the collateralization of eth in return for algorithmically pegged dai dollars.
That can be a risky business because you’re sort of leveraging yourself, but with a key difference.
While in margin trading you can lose all the funds and the amount you bet, with dai you might lose the collateralized eth, but you keep the dai dollars.
That’s because you’re kind of selling the eth for dollars, but without actually selling the eth. So if price falls, you’re left with just the dai. If price rises, you’re left with eth’s rising value as well as the dai.
Making this alchemy perhaps an obvious choice, especially for say 1%-10% of holdings for projects that have huge amounts.
Thus the Ethereum Foundation has recently begun offering devs the choice of receiving their payments in dai. While the Request Network collateralized $2 million worth of dai eth. Other projects might follow, although there’s always the risk that the MakerDAO smart contract might be hacked.
The ICO Cool Down
Dai was funded through an ICO, as was ethereum itself, but the abuse of the mechanism by most prominently EOS and others led to a backlash which then forced the Securities and Exchanges Commission (SEC) to intervene.
The SEC crackdown began slowly last year, but then ratcheted up as the American regulator gradually begun going after the “good guys” in addition to outright scammers and fraudsters.
The significant crash in eth’s price then combined to almost overnight dry up the ICO space, which is still figuring out how to move forward.
That in addition may have cooled down some innovation as new ideas could no longer raise funds in a decentralized manner.
Meaning that those who managed to get in during 2016-18 will now have to drive forward the ethereum space and perhaps fund projects to fill the gap.
There’s always Venture Capital investment by mainly billionaires, but the inability of tokens to publicly trade at least in US might make more risky projects a bit less appealing.
While for appealing projects, there’s a question of equitability because the very rich would become owners of digital public spaces, like open source code, without facing competition from the wider public which is prohibited from investing in start-ups by the Securities Act 1933.
A way around that might be the approach of the newly launched Binance Launchpad which bans US citizens from investing in ICOs offered through their platform.
Billionaire Changpeng Zhao, Binance’s owner, may have the resources and the wits to hold SEC at bay, but how the ICO space will develop now remains to be seen.