Impact of Asymmetry of Information on Success Rates of ICOs, IEOs, and Introduction to IDOs

Blockchain technology has emerged as one of the many efficient ways to fund an entrepreneurial project. Since 2013, the Initial Coin Offering (ICO) has helped entrepreneurs find funds for their projects with the use of cryptocurrencies. However, the ICO mechanism has also led to fraud and to loss of funds because of a lack in regulations, as well as to a growing amount of asymmetry of information between entrepreneurs and private investors. In this study, we focus empirically on ICOs and IEOs (Initial Exchange Offerings) to explore asymmetry of information for both methods, by studying its impact on their success. To do so, the database used for the analysis is composed of 2505 ICOs, and 247 IEOs. The success rate is determined by the variables AmountRaised, TimeToListing, and Delisted. The asymmetry of information is determined by the proxy RealizedVol, which represents the price volatility of the token’s first 30 days of listing. We show with our proxy (on a 10% significance level) that asymmetry of information has twice the negative impact on AmountRaised, for an IEO than for ICO.