The Wisdom of Crowds in FinTech: Evidence from Initial Coin Offerings
63 Pages Posted: 21 Jun 2018 Last revised: 8 Nov 2018
Date Written: September 1, 2018
Abstract
Certification by a crowd of online analysts and early investors can generate excitement among potential token investors, leading to successful initial coin offerings (ICOs). We test the general notion of "wisdom of crowds" using novel data on over 1,500 ICOs, including sequential investor subscriptions during token sales. We find that favorable analyst opinions on the underlying project are associated with aggressive initial token subscriptions, which predicts subsequent token sales. Analyst ratings also predict long-run token performance in the secondary market. Overall, our results suggest that the wisdom of crowds could substitute underwriters’ intermediary role in financing decentralized blockchain-based startups
Keywords: ICO, FinTech, Wisdom of Crowds, Information Cascade, Fundraising Success, Underpricing, Long-run Performance
JEL Classification: L26, G14, D81, D82, D83, G12
Suggested Citation: Suggested Citation
Donghwa Shin
Princeton University - Department of Economics, Bendheim Center for Finance ( email )
Princeton, NJ
United States
6096137699 (Phone)
