Some ICO blockchain projects hold more Ethereum than their actual market capitalization

Begun with the Gnosis

Last week Ethereum – based market platform on the decentralized forecast Gnosis founder Martin Köppelmann has revealed that the company will not need to rely on its holdings of 200,000 Ether collected from its 2017 token sale for at least 6-7 years. Köppelmann said:

"We felt the price of Ether falling in. We do not care too much … Being active in the Bitcoin $ 9 space this is nothing new and we are prepared for this event, we have a team of over 50 people who work full-time on the Gnosis platform and can continue to finance it for the next 5-7 years without the need to sell any of our ~ 200k ETHs in reserve. "

In recent weeks, the price of Ethereum [19659003] dropped substantially against other major cryptocurrencies such as Bitcoin, Bitcoin Cash, EOS and the US dollar. Starting from August 26, the price of Ethereum remains around $ 275.

Currently, the reserve of Ethereum holds the Gnosis group is worth about $ 55 million, based on the price of Ether at $ 275 and availability of the 200,000 Ether team. That is to say, $ 22 million greater than its market valuation of $ 33 million.

Other projects such as Tezos, Bancor and Aragon have shown similar trends, holding many more funds in Ethereum than their market valuation. Bancor, for example, has raised over $ 150 million in its highly anticipated sale, but its current capitalization remains below $ 83 million.

The main reason why most of the ICOs and blockchains ended up with more Ethereum than the size of their market capitalization is the weak moment of the small cryptocurrencies of the main markets compared to the main digital resources , in particular Bitcoin and Ethereum .

As shown in the chart below, the price of the Gnosis token (GNO) fell 92.7% from its initial price of 1.3 ETH to 0.095 ETH.

Over the past eight months, tokens such as Gnosis, Bancor, Aragon, Ontology, ICON and many others have fallen from 60 to 90% against Bitcoin, which fell 65% on its own, recording from 95% to 98 % of losses from its all-time high in December 2017.

How Should tokens are evaluated?

Like the price of pl token due to the correction of the crypto market in 2018, a growing number of investors have expressed dissatisfaction with the medium-term trend of tokens and the fact that most tokens hold more Ether in their own reserves with respect to their market valuation.

Because the formation of token prices begins with token sales, investors' frustration about the unique situation with tokens and their market valuation is understandable. However, price formation in the cryptocurrency sector is a difficult concept to establish as there are other types of cryptocurrencies like forks of other cryptocurrencies that also have their value.

Bitcoin Cash as an example is a fork of Bitcoin created in 2017. At the time of its creation, BCH was valued at about $ 600 but in December 2017, the price of BCH rose to $ 5,000.

Ultimately, since the cryptocurrency sector is still in its infancy, the digital currency market is mainly based on speculation. Tokens that have yet to release major networks and find a solid commercial use case for their blockchain networks are being traded at tens of millions of dollars to hundreds of millions of dollars.

The lack of a realistic maximum the token sales cap also contributed to the widely recognized trend of ICO market capitalization that falls below their operating capital. In the technology sector, companies raise capital from venture capital companies to valuations ranging from $ 10 million to $ 100 million where 15-30% of the company will be sold.

Although ICO does not have a solid concept of valuation and base price, since most of the capital is driven by pure speculation, which is also one of the reasons why the vast majority of blockchain projects tend to fail and investors they tend to lose in the long run.