Why ICO Whales Are Getting Richer (And You Are Not)

It started as a dream — a great dream — of disrupting the traditional fundraising system, in which only the few could really benefit from investing in the early stages of a business. Mastercoin and Ethereum named this dream the initial coin offering (ICO) and promised total transparency, ease of access to funds, and availability for all. Two years later, everybody got involved — whether as a fundraiser or as an ICO investor. Money started pouring in by the millions. The millions then expanded into billions in a blink of an eye while everybody was dreaming of exponential ROIs. For a fortunate few, those exponential ROIs became a reality. The majority, however, watched their investments turn negative. Nobody really knows exactly when the dream turned into a nightmare, but it did. Profits vanished into thin air. Companies behind the ICOs collapsed, taking the raised funds with them. The cryptocurrency market, overall, turned into a bloodbath. The whales are still here, though, and are still looking for every opportunity to prey on the average cryptocurrency investor who, unfortunately, keeps repeating the same mistakes, over and over again — mistakes that started in late 2016.

Pre-ICO Bonanza: Golem (GNT) Sale Ends In Under 30 Minutes

Golem was among those first ‘lucky’ cryptocurrency projects. Envisioned as a decentralized world super-computer, much like Ethereum, Golem raised around $8.6 million in under 30 minutes on Nov 13, 2016. The initial token price was around $0.01 — and not much changed after its listing on the major exchanges. During the ICO hype of 2017, the price spiked and reached $0.68 in June — a whopping 6800 percent profit for the ICO investor. Those who held another six months doubled their returns. On Jan 2, 2018, GNT reached an all-time high of $1.16. If we look at today’s price and compare it to the ICO price, Golem is one of the very few winners. It is trading at around $0.05 — up 500 percent. The circumstances around the ICO, however, were quite different: Bitcoin’s price was around $700, while Ethereum was worth only $10.

ICO Hype Brings GNO and BAT into the Spotlight

Soon after Golem’s ICO, Bitcoin shattered the $1,000-mark and Ethereum began its steady climb to the moon. The spring of 2017 was truly spectacular, in terms of raised funds and ROIs. Gnosis — a prediction market project build on the Ethereum blockchain — raised around $12.5 million in over ten minutes on April 24, 2017. The price of the token, at that time, was $30. After being listed on the major exchanges, GNO immediately took off, permitting the whales to rake in major profits. The price quickly reached $100 and had a local high of over $275 at the end of May, which was about a 900 percent increase when compared to the ICO price. At a later date, in July 2017, the price settled at over $300. During the altcoin hype, in Jan 2018, Gnosis made an all-time high of over $390. Following the huge success, Brave Browser’s cryptocurrency project set a new record, one month after Gnosis, on May 31, 2017. In approximately 30 seconds, Brave sold all its Basic Attention Tokens (BATs) for a total of $36 million. Later reports showed only 130 or so ETH addresses contributed to the ICO. Five of them had almost half of the total tokens sold. During the ICO hype, it was common practice for the whales to pay very high transaction fees to make sure their contributions reach the ICO smart contract first (there are reports one particular whale paying $6,000 in gas fees). Soon enough, the price of BAT skyrocketed on exchanges. BAT was worth over $0.28 five days after the ICO. During the ICO, the token was sold for $0.036. Eventually, BAT reached an all-time high of over $0.86, which is a 2500 percent increase from the initial price. Interestingly enough, BAT never plummeted to more than double the ICO price.

BitTorrent ICO Warms Whales’ Crypto Winter

2018 may have slowed the ICO whales down, but it definitely didn’t stop them. Said whales came back with a vengeance in 2019 and proved, once more, that they still control the ICO business. On Jan 28, 2019, Tron and Binance sold nearly 60 billion BitTorrent Tokens (BTT) in 15 minutes. Tron, the company behind BitTorrent, raised $7.2 million. The price of one BTT during the ICO was $0.00012. Like many others token sales, few got their hands on those 60 billion BTTs — 622 contributors, according to Binance Launchpad — with many placing the highest allowed order. The majority, though, couldn’t buy a single BTT because of various technical issues. Subsequently, they did receive a mere consolation prize of 5,000 BTTs in a Tron airdrop. Yet, the airdrop doesn’t change the fact the whales are once again the only real winners of the ICO. Unsurprisingly, the price spiked on exchanges, with many investors buying BTT at a premium. Three days after the sale, BTT was already worth over $0.0005, a more than 400 percent increase. On Feb 5, the price reached $0.001 with whales dumping their tokens for a whopping 1,000 percent profit. [bctt tweet=”If a whale went all-in during the BitTorrent ICO and bought $20,000 worth of BTTs — the individual cap — he or she could have sold those tokens for around $200,000, just days later.” username=”beincrypto”]

The Zero-Sum Game: Whales WIN!

Golem, Gnosis, BAT, and BTT are just a few examples of how whales are making money at the expense of (pretty much) everybody else. It doesn’t matter if Bitcoin is $700 or $19,000. If there is a full-blown bull market or a freezing crypto winter, the ICO whales will always have a big advantage over the average investor. They will make sure they buy most of the available token/coin supply and dump afterward, on exchanges, at a premium price. It’s a zero-sum game, after all, no matter the market — ICO or IPO, stocks or cryptocurrency. For the few whales to win, most of us will lose. Do you agree that the whales the only real winners in the ICO business? What can we do to level the field? Share your thoughts in the comment section below!