We are very excited to share our insights on the ICO market. The research was conducted by The Argon Group investment bank. Did we miss anything important? Please leave your feedback / thoughts in the comment section or contact info@argongroup.com.

This report contains the following sections:

  • ICO Market Sentiment: Argon’s Take
  • The Argon Group ICO’s
  • Upcoming ICO’s
  • News
  • Argon (Alumni) News
  • Legal
  • Must reads & listenings
  • Crypto Event Calendar
  • Economic Calendar
  • Cryptocurrency Data

Make sure to follow us on Twitter to get further insight about the ICO market, ICO regulation and all initiatives of The Argon Group: https://twitter.com/TheArgonGroup

ICO Market Sentiment: Argon’s Take

The crypto market has seen prolonged consolidation in micro-to-mid cap names, as capital has continued to syphon to large cap names (particularly BTC). Through conversations with clients and investors, we continue to believe this is a broad-based decline with no directional bias towards protocol or token application quality. We find that investors continue to have interest in emerging projects, reflected by underweight positions in BTC and accumulation of reserve cash.

In October, we saw slowing in the broad ICO market off the back of a record September, while data per deal stayed similar. According to Argon data, October closed 15 deals above $6m (with an average of $24m raised in the group), and the average deal hitting ~60% of its hard cap. This compares to 14 deals in September averaging ~61% of the initially stated hard cap, with average funding of $23m in the group. We note progression in interest in the space, and an increasing amount of inbound ICO advisory requests. We estimate a ~25/75 split between securities/utility tokens.

Looking into November, we cite potential impairments to the crypto markets such as: 1) continued retention of capital flow in BTC, as historic fork uncertainty suggests a flight-to-safety prior to the Segwit2x fork, and 2) seasonally-muted funding during the holidays. Despite the macro fundraising climate, we find several constructive developments such as: 1) continued entrance of new capital through fundraising within crypto hedge funds, 2) an increasing amount of risk management tools, particularly the recent CME futures opening, potentially mitigating risk associated with foregoing BTC & ETH rallies to participate in ICO’s, 3) a broader base of market participants (particularly larger quants and market makers), providing further liquidity in these nascent markets, and 4) historic confidence that outflows of BTC typically flow to ICOs and micro-to-mid cap names.

The Argon Group ICO’s

Protosa crypto hedge fund which will invest in cryptocurrencies and digital tokens utilizing a data-driven trading strategy, is underway in its pre-sale and will open its public sale on November 7. The Protos ICO is advised by the Argon Group.

Nuggets, a consumer blockchain platform which gives users a single biometric tool for login/payment/ID verification using zero-knowledge storage, commenced its pre-sale and will open its public sale on November 14. The Nuggets ICO is advised by the Argon Group.

Science, the first incubator ICO, launched its first portfolio company. SpringRole, the first professional reputation network power by artificial intelligence and blockchain to eliminate fraud. Science ICO is advised by the Argon Group.

Upcoming ICO’s

(11/02) Smartlands — an agriculture-backed token, the first built on Stellar Lumens (XLM)

(11/03) DMarket — a decentralized platform to connect virtual and real commodities.

(11/08) IndaHash— an influencer marketing platform that connects influencers to brands.

(11/13) Jury.Online — a decentralized dispute resolution network.

(11/14) Auctus Project — smart contract power pension funds.

(11/15) Crypto Alias — an alias system for complex blockchain addresses.

News

· OSTK upgraded by DA Davidson analyst Forte after announcement of its tZERO ICO. Shares are +225% in the past two months, with a gain of ~25% on the ICO announcement alone. The Argon Group will be advising the tZero ICO.

· Ex-Credit Suisse Digital Officer Marco Abele quit to launch his own platform, TEND.

· UBS CEO Sergio Ermotti stated that he is “not necessarily” a believer in cryptocurrencies, but likes the blockchain technology. This statement comes just a few months after his former CIO Oliver Bussmann, who left the firm to pursue opportunities in the space, made bullish remarks on the potential of cryptocurrencies and ICO’s.

· The Ethereum (ETH) network’s non-contentious hard fork Byzantium launched smoothly.

· Vitalik Buterin, co-creator of the Ethereum network, unveiled a multi-year plan for Ethereum at the Devcon3 conference.

· The CME Group announced the launch of Bitcoin futures, to open in 4Q17.

· IBM settled cross-border payments transactions using the Stellar Lumens (XLM) cryptocurrency.

· World Bank President Kim stated that blockchain technology is “something everyone is excited about”.

· Investor Peter Thiel said that people are “underestimating Bitcoin”, and that it has “great potential left”.

· Saudi Prince Alwaleed stated that Bitcoin is “Enron in the making”, going further to state that “it just doesn’t make sense” and “it’s not under control” of a central bank.

· Amazon.com purchased three domain names related to cryptocurrencies.

· Former Federal Reserve Chairman Ben Bernanke gave bearish statements on Bitcoin and cryptocurrencies at the Ripple Swell conference in Toronto.

· ECB President Mario Draghi stated that cryptocurrencies like Bitcoin are “not mature enough” and “should be embraced with lots of attention to its potential risks”.

· The Zcash Investment Trust made an official filing with the SEC, signifying that the trust will go live soon, similar to the Bitcoin Investment Trust (GBTC).

· Warren Buffett stated that “you can’t value bitcoin because it’s not a value-producing asset”.

Argon (Alumni) News:

(10/19) The Argon Group Our General Counsel, Emma Channing was nominated for Coindesk’s “Most Influential People in Blockchain 2017” in the category “Law & Regulation”. We would really appreciate if you could take the time to vote for her here.

(10/27) STORJ/BTC was added to the Poloniex exchange.

(10/25) SALT, the first membership unit-centric loan network to allow customers to secure cash loans in blockchain-asset collateral-based agreements, announced the release of a crypto-secured credit card as a line of credit that is collateralized by blockchain assets (to be released in 2018) as a stand-alone product or with a loan. The SALT membership sale is advised by Argon Group.

Legal

Argon has always been very careful about the projects it takes on and the diligence we do into the companies we represent for ICOs. One of the questions that always surprise us are themes along the lines of “why can’t we just evolve away from regulation” or even “why do we have to comply with regulation”. “Why regulation?” would be a thesis in and of itself, but generally speaking regulation is there because something at one time greatly harmed a large numbers of members of the public and generally speaking governments are there to protect their citizens. For example, the Jay walking laws came out of horrific pedestrian/motor car fatalities as motor cars emerged as a more common form of transport in the 1930s, although their continued enforcement is a different question. By the same hand the Securities Act of 1933 and Securities Exchange Act of 1934 were driven by the penny stock scandals of the 1920s and the crash of 1929.

Responsible regulation and reasonable enforcement is generally a good thing in our book and the SEC has made it pretty clear that its initiatives this year are cyber related issues and protecting retail investors — two issues that always turn up in badly designed ICOs. We have watched the SEC’s enforcement activities to date on ICOs with interest and great respect — which have predominantly been the:

· The SEC’s 21A Report on the DAO

· The SEC enforcement against Protostar

· The SEC enforcement against two scam coins

These have been careful, well thought out and discrete enforcement actions that have greatly increased the understanding of practitioners in the space of where the SEC will be focusing its efforts and how it will be interpreting the Howey Test, which will always be a facts and circumstances analysis (don’t be expecting some sort of bible to come down from the SEC or anyone else on Howey, there’s decades and decades of case law out there that does that). The whole ICO industry has benefitted as a result, and this is why, for many reasons, that when someone touts themselves to the Argon Group as “unregulated” or “outside regulation” our response is without fail, thanks but no thanks.

Must reads & listenings

8 Things We Learned at Devcon3 by Lukas Schor of The Argon Group

A Bitcoin Beginner’s Guide to Surviving the Bgold and Segwit2x Forks by Aaron van Wirdum of BitcoinMagazine

Hashpower Episode 3: Funding, Forking, and a Creative Future by Patrick O’Shaughnessy (Olaf Carlson-Wee, Naval Ravikant, Peter Van Valkenburg, Jameson Lopp, Ari Paul, and Fred Ehrsam)

Crypto Event Calendar:

(11/4–11/5) Scaling Bitcoin 2017 — Scaling the Edge; Palo Alto, US

(11/6–11/7) The Rise of Digital Money; Washington DC, US

(11/7–11/9) DeveloperWeek Austin; Austin, US

(11/9–11/10) 2017 Asia Digital Asset & Blockchain Congress; Shenzhen, China

(11/10) 2nd Annual Blockchain Conference Hong Kong; Hong Kong, China

(11/10) The StartEngine ICO 2.0 Summit; Santa Monica, US

(11/14) Blockchain for Wall Street; New York, US

(11/16) Blockchain in Healthcare; Boston, US

(11/17–11/18) World Funding Summit; Los Angeles, US

(11/28) Consensus: Invest; New York US

(11/29–11/30) Blockchain Expo North America; Santa Clara, US

Economic Calendar:

11/06: Speech from Janet Yellen of Fed at 13:00 GMT (Potential Crypto Impact: Low)

11/06: Speech from William Dudley of Fed at 16:00 GMT (Potential Crypto Impact: Low)

11/16–11/17: Speeches from Lael Brainard of Fed at (N/A) GMT (Potential Crypto Impact: Med)