ICO Mania Has Calmed Down a Bit – And That’s Not So Bad

What do printed manifestos, football leagues and bathroom marketing have in common?

All three showcased that interest in initial coin offerings (ICOs) was alive and well at CoinDesk’s Consensus: Invest conference on Tuesday. But while attendees on the floor may have seen all the usual evidence of a frothy market, attitudes from investors and entrepreneurs surveyed appeared more dour.

For example, while investors expressed no doubt about the promise of decentralization, they did voice broad skepticism about the majority of new coins on offer.

“I definitely feel like the mood around the ICOs has come down from being ultra, ultra hot,” Chase Lochmiller of Polychain Capital told CoinDesk.

Backed by Andreessen Horowitz and Union Square Ventures, Lochmiller said Polychain now has $400 million invested exclusively into the crypto market.

Yet, one of the big themes from Consensus: Invest was the increasing sophistication of the larger crypto market, as it has added capacity in derivatives, exchanges and custody infrastructure. In contrast, most of the best tools are only available to traders in larger cryptocurrencies such as bitcoin and ether.

In other words, while retail investors may want into the ICO market, financial service providers haven’t been in a rush. That said, the ICO market is catching up to the dominant coins, as new cryptocurrency hedge funds begin allocating capital.

“I think having more investors in the space is helpful,” Lochmiller said, adding that it increases competition and the pressure on projects to produce, as well as giving the market legitimacy.

Lochmiller expects a lot of the financial instruments being built for bitcoin and ethereum now to eventually filter down to smaller tokens, and he sees opportunity in facilitating shorts.

“I think a very interesting space to tackle is the token lending market,” he said.

If someone wants a short, they need a way to find someone willing to lend the tokens they want to bet against. That scenario doesn’t exist yet. Still, it fits into a larger theme that came up throughout the day: how to bring more liquidity into smaller tokens.

“You have got to get trading volume,” Ian McAfee of Shift Forex said during his presentation.

One area of promise he sees is building exchanges with non-English user interfaces and in markets not denominated in the dollar or the euro…

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