Initial Coin Offerings


30 Pages Posted: 22 Apr 2018 Last revised: 22 May 2020

See all articles by Paul P. Momtaz

Paul P. Momtaz

Technische Universität München (TUM) - TUM School of Management; University College London Center for Blockchain Technologies; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: July 7, 2018


This paper examines the market for initial coin offerings (ICOs). ICOs are smart contracts based on blockchain technology that are designed for entrepreneurs to raise external finance by issuing tokens without an intermediary. Unlike existing mechanisms for early-stage finance, tokens potentially provide investors with rapid exit opportunities thanks to liquid trading platforms. The marketability of tokens offers novel insights into entrepreneurial finance, which I explore in this paper. First, I document that investors earn on average 8.2% on the first day of trading. However, about 40% of all ICOs destroy investor value on the first day of trading. Second, I explore the determinants of market outcomes and find that management quality and the ICO profile are positively correlated with the funding amount and returns, whereas highly visionary projects have a negative effect. Among the 21% of all tokens that get delisted from a major exchange platform, highly visionary projects are more likely to fail, which investors anticipate. Third, I explore the sensitivity of the ICO market to adverse industry events such as China's ban of ICOs, the hack of leading ledgers, and the marketing ban on FaceBook. I find that the ICO market is highly susceptible to such environmental shocks, resulting in substantial welfare losses for investors.

Keywords: Initial Coin Offerings, ICOs, Token Sales, Virtual Currencies, Digital Currencies, Cryptocurrencies, Blockchain, Distributed Ledger Technology, Crowdfunding, Entrepreneurial Finance

JEL Classification: G24, G32, K22, L26

Suggested Citation

Momtaz, Paul P., Initial Coin Offerings (July 7, 2018). PLOS ONE, Available at SSRN: or

Paul P. Momtaz (Contact Author)

Technische Universität München (TUM) - TUM School of Management ( email )

Arcisstr. 21
Munich, 80333

University College London Center for Blockchain Technologies ( email )

UCL CBT UCL Computer Science
Malet Place London WC
London, London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679

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