Boston College Researchers Find that the Average ICO Investor Makes 82% Return
Researchers at the Boston College Carroll School of Management recently published a new report that indicates that ICO investors are generally making large profits, despite the prevalence of scams and fraud in the space. The report is titled “Digital Tulips? Returns to Investors in Initial Coin Offerings” and analyzes over 4,000 ICOs which raised a total of about $12 billion. Returns for investors who purchased during token sale periods are compared with returns for investors who purchased after exchange listings.
The research found that the average ICO token rose almost 180 percent from its initial token sale price to its exchange listing price. The average holding period (token sale duration) was only slightly more than two weeks. The study also accounts for investors who purchase ICO tokens after their exchange listings. The returns for tokens purchased after an exchange listing were much lower, but still significant. The post-listing cumulative returns for ICO tokens are shown in the below graph. After averaging token sale returns and post-listing returns, the average ICO investor still gained about 82% in USD value.
Tokens which never achieved an exchange listing by 60 days after the end of their token sale are included in the ‘post-listing returns’, with a return of -100% (the tokens are worthless if investors have no exchange to sell them to a willing buyer). As shown by the above graph, even those ICO investors who don’t purchase tokens until after an exchange-listing still significantly outperform token indexes and bitcoin.
ICO tokens increased an average of 67 percent during the first 30 days of trading, 140 percent for the first 90 days, 430 percent of 180 days, and 1,880 percent over one year. For investors who purchased during a token sale period, and held for a year after an exchange listing, the average cumulative return would be over 5400%. The findings are consistent with expected risk-return profiles; while ICOs are highly speculative and risky investments, the average returns yielded by a basket of tokens are proportionally high.
The report discusses this risk-return profile:
“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.”