The Wisdom of Crowds in FinTech: Evidence from Initial Coin Offerings

Abstract

Certification by 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 nearly 3,400 ICOs, including sequential investor subscriptions during token sales. We find that favorable analyst opinions on the underlying projects are associated with aggressive initial token subscriptions, fundraising success, and exchange listing. Analyst ratings also predict long-run token performance. Our results hold during the ICO market's boom-and-bust cycle. Overall, our results suggest analysts' intermediary role in ICOs, a type of direct placement in the FinTech era.

Keywords: ICO, FinTech, Wisdom of Crowds, Information Cascade, Fundraising Success, Underpricing, Long-run Performance

JEL Classification: L26, G14, D81, D82, D83, G12