State of the Token Sale Market, Part 1: Signs for Concern?

  • Retrospective
  • April 27, 2017

Token sale markets have been hot–too hot, some say. We take a look at the recent rise in token sale activity in several contexts.


The controversial Gnosis reverse dutch auction concluded on Monday and sent shivers through the emerging token sale market. The sale gave the token an effective valuation of over $300 million, more than three times what Augur, its closest competitor, is currently worth. The mechanics of the reverse dutch auction meant that the development team kept over 95% of the GNO tokens, while still having $12 million in direct funding.

This on the heels of several high-profile token sales in April have stoked suspicions of market mania and a possible bubble. The attention has spilled over into mainstream news, with mentions in Wired, Bloomberg,  Harvard Business Review, and the Economist.

Google Search interest for the term "Initial Coin Offering" has risen sharply in 2017

There is no doubt that token sale activity has been steadily increasing throughout 2016 and into 2017. In the first quarter of 2017, projects raised almost 40% of what they raised in all of 2016. The average amount per sale didn’t significantly rise either, staying just less than $2 million, showing that there was an increase in both high-raise sales and the low-raise sales that don’t see much press. The market was continuing a steady but standard growth, made seeming more extreme due to the increasing attention paid to it.

Until April.

Monthly amount raised in Token Sales from 2013 to 2017

April has raised more money than any other month in token sale history. Given the spikiness of the monthly amounts, we also look at rolling monthly averages to better show increases over time. The increase over the past twelve months has been consistently averaging around 20%, much more steadily than popular interest has. April has been a radical divergence.

Token Sale Market chart

April so far has seen eight token sales that have raised on average almost $10 million. Several more should conclude that have above-average raise amounts, and the market does not yet show signs of slowing.

Even more concerning are the number of controversies in the projects themselves: signs of a disconnect between the projects and how deeply sale participants understand them.

  • The Gnosis sale gave the project an effective $300 million valuation, putting it among the top ten tokens by total value–and far above any other meta-tokens. The reverse dutch auction was also confusing to many people, particularly in the middle of a highly speculative market. This gave the Gnosis team 95% of tokens, almost the inverse what has become standard. We support projects that do smaller raises at earlier stages and reserve tokens for future raises, similar to how early stage projects seek external funding. Melon, Santiment, and Sikobo are examples of this approach. This wasn’t the effect of Gnosis’ structure though: Gnosis still went for $12 million regardless of the number of tokens sold.
  • Aeternity raised millions without a clear explanation of their eventual token supply. They subsequently clarified that there will be a cap on their next sale, slated for this year. They also needed to (and did) address confusion over the relationship their core developer, Zack Hess, had with the project..
  • Cosmos had a “hidden cap” on its sale that wasn’t revealed until it was hit, leaving sale participants wondering how much their individual participation would be diluted.
  • Matchpool had its lead developer publicly quit shortly after the sale, accusing the founder of trying to steal funds and claiming the technical capabilities of the team were limited. The accusations were refuted but the move caught participants off guard and demonstrated how little many token sale participants really know about these projects. The need for more third-party research couldn’t be higher.

These projects now have the resources to deliver something valuable to the community. That should be applauded. What should give everyone pause is that these all, taken together, show a need for greater understanding about these opportunities. Meanwhile, millions continue to pour into them.

If these numbers seems to be diverging from the valuations and scale of fundraising for traditional companies – that’s because they are. In part two we look at recent token sales compared to traditional analogs in the venture space.

Update: an earlier version of this article stated that Matchpool’s CTO quit in the middle of the sale. He was actually the lead developer and quit shortly after the sale ended. We also added a link to an Economist article about token sales.