Digital Tulips? Returns to Investors in Initial Coin Offerings

54 Pages Posted: 5 Jun 2018 Last revised: 4 Jan 2021

See all articles by Hugo Benedetti

Hugo Benedetti

ESE Business School - Universidad de los Andes (Chile)

Leonard Kostovetsky

Carroll School of Management, Boston College

Date Written: May 20, 2018

Abstract

We analyze a dataset of 2390 completed ICOs, which raised a total of $12 billion in capital, nearly all since January 2017. We find evidence of significant ICO underpricing, with average returns of 179% from the ICO price to the first day's opening market price, over a holding period that averages just 16 days. After trading begins, tokens continue to appreciate in price, generating average buy-and-hold abnormal returns of 48% in the first 30 trading days. We also study the determinants of ICO underpricing and relate cryptocurrency prices to Twitter activity.

Keywords: Initial Coin Offering, ICO, Token, Blockchain, Cryptocurrency, Venture Capital, Crowdfunding

JEL Classification: G30, G39

Suggested Citation

Benedetti, Hugo E and Kostovetsky, Leonard, Digital Tulips? Returns to Investors in Initial Coin Offerings (May 20, 2018). Journal of Corporate Finance, Vol. 66, No. 101786, 2021, Available at SSRN: https://ssrn.com/abstract=3182169 or http://dx.doi.org/10.2139/ssrn.3182169

Hugo E Benedetti

ESE Business School - Universidad de los Andes (Chile) ( email )

Av. La Plaza 1905
San Carlos de Apoquindo, Las Condes
Santiago
Chile

Leonard Kostovetsky (Contact Author)

Carroll School of Management, Boston College ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

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