Initial Coin Offerings

47 Pages Posted: 22 Apr 2018 Last revised: 15 Nov 2018

See all articles by Paul P. Momtaz

Paul P. Momtaz

University of California, Los Angeles (UCLA)

Date Written: July 7, 2018


This paper examines how virtual currency (or cryptocurrency) projects acquire external finance through initial coin offerings (ICOs). The results suggest that ICOs create, on average, investor value in the short run. Raw and abnormal first-day returns range from 6.8% to 8.2%. This is consistent with the market liquidity hypothesis of ICOs according to which issuers have an incentive to underprice in order to generate market liquidity, which, in turn, increases the inherent value of their virtual currency. I also study the determinants of first-day returns, total funding, money left on the table, time-to-market, and the failure of projects. Further, evidence on the sensitivity of ICO pricing to important industry events such as major hacks and regulatory actions is presented. The paper also offers an in-depth overview of what ICOs are, how they work, and how they compare to conventional financing methods.

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). Available at SSRN: or

Paul P. Momtaz (Contact Author)

University of California, Los Angeles (UCLA) ( email )

405 Hilgard Avenue
Box 951361
Los Angeles, CA 90095
United States

Register to save articles to
your library


Paper statistics

Abstract Views
PlumX Metrics