Liquidity is investment Life-blood, lack of flow can quickly turn fatal.
Initial Exchange Offerings allow the exchanges to share their reputational capital and strategically align with new STOs to expedite their availability for trade, both into and out of the new assets.
Can you quickly, easily, and cheaply get out of any investment position that you take?
Ideally, you can. In reality, you often can't.
Volume is merely a measure of the speed liquidity is flowing and the size of the portal it flows through. Prices at any one point in time are less important over the long-run than when one enters and exits the markets. For long term plays, speculation as to the exact price at entry is less relevant than direction, sizing, and timing of the position held in the asset class.
It was in the search for liquidity that ICOs were created; as an investment solution that could shorten capital lock-up times and allow more flexibility into and out of positions in those assets.
Yet a lack of regulatory certainty brings its own set of risks.
Initial Exchange Offerings, IEOs...
The immediate liquidity provided by the quick launch for trading on the exchanges provides value to:
--the investors that got into their positions in the private-sale,
--the developers of the initial minimum viable product, and
--the founding entrepreneurs
All perhaps needing an opportunity to recoup some of their initial investment. And by having the new token made immediately available for trading in the exchange marketplace, some of the liquidity pressures that can build up with a long hold time in any investment position can be released. Whether that investment was capital, labor, or invention, long hold times can create a cash squeeze that pushes high volumes of capital out of the investment as soon as a release in pressure becomes available.
Outsourcing the compliance concerns to the exchanges and mutually aligning incentives between the investors, the exchange, and the token founders. Allowing the exchanges to focus on their areas of expertise and letting the new token Creators keep their attention on building utility and real value to support the token's existence. Often the developers of the technology and the business administrators are not ideally suited for managing the complex custodial, compliance, and clearance issues of a new token offering. But that is exactly what the Exchanges themselves are in the business of doing at a retail level with individual traders and business accounts.
With the exchanges having a 'stake in the game', strategically aligned with each token they offer on their platforms they're motivated to assist with marketing and promotions of the new tokens. With so many new security tokens coming to market, the retail traders may better off by having the exchanges perform some initial due diligence on each token as they curate which solutions to put their name, money, and reputation behind.
Crypto exchanges are effectively 'virtual flea-markets'
Nearly anyone could buy their way into a 'vending booth' and get their token sold in the marketplace when they were operating as ICO 'Pirates' working outside of the regulatory realm. By the centralized nature of the marketplace itself, with its assets subject to seizure and run by known administrators, these 'grey markets' was never going to last indefinitely. When it comes to operation as 'Privateers', launching IEOs with their prophylactic paperwork in place, the centralized exchanges are capitalizing their reputation placing their Brand, (and potentially with legal consequences on the line too, if they make the mistake of marketing and selling to unaccredited US investors), Just as grocery stores do when they endorse and sell their own Branded versions of many items on the store shelves. But for IEOs, with potential jail time and very large financial penalties for acting as a Broker/Dealer without licensing from the State.
https://www.coindesk.com/secs-crypto-czar-says-exchanges-that-list-ieo-tokens-may-face-legal-risks
Who do you trust more to properly address the many legal, technical, and marketing issues faced by new tokens?
The 'Farmer' that knows how to create quality 'produce', or the 'Grocer' that runs the 'store' for a living...
The IEOs allow more immediate liquidity for the newly available tokens and trust more quickly established through the reputational capital 'loaned' by the grocery store/exchange. Often with better marketplace prices due to the lack of friction in reaching the consumers. Any centralized solution has inherent risk exposure to the threat of external attacks from governments and hackers, as well as from internal fraud and theft. But that risk is the price to be paid by the investors for outsourcing to the exchanges the responsibility for custody, compliance, and clearance of token funds.
The rewards of using IEOs being that:
--the Founders can stay focused on their solutions,
--the Exchanges can stay focused on facilitating exchange and compliance while escrowing assets and managing the order book.
--And the Investors can more quickly, efficiently, and cheaply move both into and out of the newly available assets.
One last thing.
Here's a link to a Slideshare deck for a private banking arrangement, as an alternative liquidity solution combining crypto, precious metals, and fiat currencies.
https://www.slideshare.net/MichaelLouisJrOvsen/bullion-backed-private-banking
Using this strategy could allow you to hold your metals and still invest half that capital into your favorite IEO, more BTC, more metals, or keep it liquid as Fiat using this P2P collateralized lending solution. The slide deck doesn't name the exact platform to use though, so if you don't already recognize it from the slides just message me for more info and I'll be glad to share the details.
Sail safe my friends, these crypto-seas are unpredictable, uncharted, and
unforgiving of mistakes.
Michael Louis Jr; Ovsen
The Taoist Cryptobanker
WhatsApp: +1 512-693-7076
Linkedin https://www.linkedin.com/in/michael-louis-jr-ovsen/
I’m reaching out to Bitcoin holders to share my unique perspective on the evolving cryptocurrency industries. My decades of street-level entrepreneurship while voluntarily operating as one of the ‘unbanked’ while being surrounded by the ‘Banked’, has provided rare experience in permission-less, face-to-face, peer-to-peer, un-censorable, and immutable transactions. The operational security protocols required by trustless transactions are rarely acquired by those operating in legal above-board industries using banking credit and debit payment solutions. Even legal operations with Cash-Only requires learning and practicing Op-Sec disciplines foreign to those used to trusting 3rd party custodians for authentication of identity, verification of funds, and custodial escrow services.