Are ICO Cashouts Crashing Cryptocurrency Prices?

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Are ICO Cashouts Crashing Cryptocurrency Prices?

Ethereum (ETH) is the network of choice for most digital currency startups contemplating an ICO. A startup will launch an initial coin offering (ICO) on the Ethereum network, raising funding from ETH investors. After the ICO, the firm will have a large amount of money in ETH and other currencies. However, in most situations, these firms do not keep these cash for long. According to a recent analysis by News BTC, the process of ICO enterprises cashing out of ETH and other pre-existing digital currencies may have a negative impact on the whole cryptocurrency market.

EOS as a Case Study

EOS is one of the most recent big ICOs. Following a year-long fundraising campaign in which the creators of the EOS token received about $4 billion in crowdsourced funding, most of the ethereum raised has been converted to fiat cash. According to the allegation, 300,000 ETH were sold prior to EOS being listed on the Binance platform. Transacting with such a huge sum of digital money in such a short period of time is quite rare; although it’s hard to verify whether this massive sale was orchestrated by the EOS team, the report implies that it was. Of course, when such a significant amount of any digital money is sold off in such a short period of time, the price of that currency suffers as well.

Other Potential Causes

While initial coin offerings (ICOs) may have had a role in the latest wave of bitcoin sell-offs, there are other possible causes. Manipulation is a major problem for the business, despite the fact that it is very difficult to prove. Even said, the transfer of vast amounts of digital money at once does not always signal criminal behavior; in fact, some digital currency users simply have access to massive amounts of cash.

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Another possibility is that ICOs are selling their assets. While some corporations may sell off a portion of their assets to generate operating cash, these transactions may overlap and cause market swings. Because of the blockchain’s openness, analysts will almost certainly be able to witness these transactions but will never be able to tell who is making them or why.

Investing in cryptocurrencies and Initial Coin Offerings (“ICOs”) is very dangerous and speculative, and this article is not a suggestion by Investopedia or the writer to do so. Because every person’s circumstance is different, a knowledgeable specialist should always be contacted before making any financial choices. Investopedia makes no guarantees or warranties about the accuracy or timeliness of the information provided on this site. The author owns bitcoin and ripple as of the day this post was published.

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