Despite holding its second place position by market cap, Ethereum’s (ETH) price point has seen incredible highs and extreme lows throughout the past year. It is partly believed that these volatile changes are due to ICOs selling off their copious amounts of ETH to gather extra funds. However, a new study from Bitmex Research and Tokenanalyst states otherwise.
Finding The Culprit
The study looked at 222 ICO projects, who have together raised $5.5 billion worth of Ether. Interestingly, these groups have then gone on to sell nearly that same amount, meaning ICO selloffs are unlikely to be the cause of Ethereum’s recent dip.
However, the study finds that “the figures are somewhat skewed by the EOS project, which remarkably raised around 70% of the Ethereum (by US$ value) of all the projects on our list, if our estimates are correct.” That said, even without the EOS case, the theory remains the same.
In coming to this conclusion, the researchers analyzed the amount of ETH raised by the 222 ICOs and totaled it (15.1 million ETH) before aggregating how much of that ETH was sold or transferred (11.3 million ETH). This means that around 3.85 million ETH is still being held by these projects. EOS can be ignored, as it has gotten rid of all of its ETH.
“Despite the 85% reduction in the Ethereum price from its peak, the projects have realised gains of US$727 million due to profits from Ethereum have they already sold, often selling before the recent price crash,” reads the report. “The 3.8m Ethereum still on the balance sheets of these projects may not have that much of an impact on the Ethereum price, as it represents a reasonably small proportion of the 102 million supply of Ethereum. At the same time, on a macro level, the projects may be feeling reasonably confident rather than needing to panic sell.”
Also, the report states that some ICOs may be sitting on profits of $93 million based on Ethereum’s current price, while others are probably sitting at a loss. The unrealized losses of all projects total $311 million worth, but the unrealized profits reach $403 million.
Suggested Reading : Learn how EOS compares to Ethereum in our coin comparison article.
Calculating The Total
Over the past 26 months, the collective ICO treasuries reached a peak of 5.1 million ETH, noticeably lower than the 15.2 million raised. This could mean that some ETH was reused for new projects after being sold.
In detailing EOS’ statistics, the researchers had to study 171 “internal transactions” which transferred ETH outside of the network. These trades accounted for 7.2 million ETH ($3.9 billion). However, the researchers aren’t entirely confident that the 7.2 million wasn’t double counted. They have reason to believe the analysis is legitimate, but they simply can’t be as sure as they are with the other projects.
Simply put, this study finds that ICO projects don’t have nearly as much effect on Ethereum’s price as previously thought. In fact, the reports find that “the ICOs have clearly been a phenomenal success, to such an extent that even a further significant fall in the value of Ethereum will barely make a dent into the success.”
However, it’s impossible to say what these findings mean for the future of Ethereum.