Four out of five initial coin offerings (ICOs) that have taken place in the last year have been classified as scams, according to a recent study by Satis Group, an ICO advisory firm.
ICOs have been the rage of the cryptocurrency world because they allow companies to raise money for various ventures by issuing cryptocurrency tokens that users could buy and later trade on cryptocurrency exchanges.
The concept is similar to an IPO, but instead of shares, companies issue tokens, and some companies promised to buy tokens back from users after a product became successful and the token’s value increases.
Only 8% of ICO tokens have ended up on exchanges
The study’s results don’t bode well for people who’ve invested in one or more and are expecting profits sometime in the near future.
The Satis study organized ICOs in six categories, based on their current status. Only ICOs with a market cap of $50 million or higher have been included in the results, and the percentage of scammy ICOs would have probably bee higher if researchers looked at the smaller ICOs.
According to researchers, 81% of ICO’s were Scams, 6% were classified as Failed, 5% had Gone Dead, and 8% went on to trade on a exchange.
Of the ICOs that had their tokens included on an exchange platform, 2.8% were in a Dwindling state, 1.6% were considered Promising, and only 3.8% were classified as Successful.
The six ICO categories are detailed below: