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New Mangrove Report: Average ICO Returns 1,320%

By Ratko Stambolija
Published about 3 years ago

New Mangrove Report: Average ICO Returns 1,320%

LONDON — A blind investment in every Initial Coin Offering (ICO) to this date, including those who have failed, would have brought an average return of 1,320% profit for investors, according to a new report.

Venture capital firm Mangrove Capital Partners recently issued a report that says: "If one had blindly invested 10,000€ in every ICO, including the significant number of ICOs that failed, this would have delivered a +13.2x return."

Michael Jackson, the former COO of Skype and a partner at Mangrove, wrote the report after checking the data on 204 ICOs with "known outcomes" — including the ones where tokens are now being actively used as well as those that have failed since issue.

These findings explain why many institutional investors — from hedge funds to investment banks — are now opening up to the digital currencies.

ICOs became extremely popular in 2017, with over $2 billion raised since the beginning of the year. For companies looking to apply the blockchain technology, ICOs have been by far the biggest source of funding.

However, numerous regulators around the world have issued warnings that ICO investments are highly risky and unproven. While some coins have skyrocketed in value, the market is characterized by colossal volatility.

Despite these uncertainties, many investment funds and banks are starting to take an interest in ICOs and cryptocurrencies.

'Hedge funds and mutual funds are assessing the crypto opportunity.' Etienne Brunet, a London-based venture capitalist, told the press: "Over the last year or so you have had crazy returns in the crypto space.

"It took institutional investors a long time to go from ‘what is this' to 'maybe we should invest,'" he said. "First, VCs were the ones interested in investing in an ICO. Now, institutional investors ranging from hedge funds and mutual funds are quickly pushing the effort to assess the crypto opportunity."

Hedge funds and other highly active investors have struggled in the post-financial crisis era due to the rise of exchange-traded funds and different passive investment schemes.

The appeal of the crypto market for active investors is that they can offer the promise of "alpha" — returns above market averages.

Autonomous NEXT, a fintech analytics company, said that there were at least 55 cryptocurrency hedge funds at the market. Since then, Mike Novogratz, a former manager at Fortress, has announced his plans to set up a $500 million for a new cryptocurrency hedge fund, and many other smaller hedge funds are appearing on the market.

Goldman's Stamp of Approval

According to the recent reports, Goldman Sachs is looking to set up a Bitcoin trading desk. It follows a message sent to clients in August saying: "It’s getting harder for institutional investors to ignore cryptocurrencies."

The reason for this move lies in the simple lack of liquidity on the exchanges, meaning that big institutional investors need an OTC broker to buy or sell a desired quantities of cryptocurrencies.

Goldman could fulfil this role. But the issue of regulations still remains.

Still, Mangrove's Jackson said: "Once regulated, ICOs could fundamentally change how businesses source growth capital and profoundly impact the venture capital and investment banking communities."