Investors have continued to pour money into cryptocurrency startups this year through a controversial fundraising method despite a regulatory crackdown that threatened to stifle the nascent market.
Initial coin offerings raised $11.8 billion this year through May, more than double the $5.5 billion such offerings raised in all of 2017, according to a Wall Street Journal analysis of nearly 900 offerings listed on ICOBench.com. Fundraising amounts aren’t independently verified, and monthly figures are compiled based on the date each offering ended.
ICOs, a hybrid of an initial public offering and crowdfunding campaign, have become popular with cryptocurrency startups looking to raise funds. These companies create digital tokens similar to bitcoin and sell them to the public, often before they have even developed or released a product.
Investors generally don’t get equity stakes, but rather bet that the tokens, which often unlock services on a to-be-launched product, will rise in value if the startup is successful.
Their surge this year comes despite intense scrutiny from regulators like the Securities and Exchange Commission, well-publicized frauds and scams and a broad selloff in the cryptocurrency market. Those challenges have scared away some retail investors, but big technology-focused investors continue to plow into ICOs in the hopes of hitting it big.
