Initial Coin Offerings and the Cryptocurrency Hype: The Moderating Role of Exogenous and Endogenous Signals

Ferdinand Thies; Sören  Wallbach; Michael Wessel; Markus Besler; Alexander Benlian

doi:10.1007/s12525-021-00460-9

Initial Coin Offerings and the Cryptocurrency Hype: The Moderating Role of Exogenous and Endogenous Signals

Ferdinand Thies, Sören Wallbach^*, Michael Wessel, Markus Besler, Alexander Benlian

^*Corresponding author for this work

Department of Digitalization

Research output: Contribution to journal › Journal article › Research › peer-review

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Abstract

Initial coin offerings (ICOs) have recently emerged as a new financing instrument for entrepreneurial ventures, spurring economic and academic interest. Nevertheless, the impact of exogenous and endogenous signals on the performance of ICOs as well as the effects of the cryptocurrency hype and subsequent downfall of Bitcoin between 2016 and 2019 remain underexplored. We applied ordinary least squares (OLS) regressions based on a dataset containing 1597 ICOs that covers almost 2.5 years. The results show that exogenous and endogenous signals have a significant effect on the funds raised in ICOs. We also find that the Bitcoin price heavily drives the performance of ICOs. However, this hype effect is moderated, as high-quality ICOs are not pegged to these price developments. Revealing the interplay between hypes and signals in the ICO’s asset class should broaden the discussion of this emerging digital phenomenon.

Original language	English
Journal	Electronic Markets
Volume	32
Issue number	3
Pages (from-to)	1691-1705
Number of pages	15
ISSN	1019-6781
DOIs	https://doi.org/10.1007/s12525-021-00460-9
Publication status	Published - Sept 2022

Keywords

Initial coin offering
Cryptocurrencies
Signaling theory
Fundraising

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title = "Initial Coin Offerings and the Cryptocurrency Hype: The Moderating Role of Exogenous and Endogenous Signals",

abstract = "Initial coin offerings (ICOs) have recently emerged as a new financing instrument for entrepreneurial ventures, spurring economic and academic interest. Nevertheless, the impact of exogenous and endogenous signals on the performance of ICOs as well as the effects of the cryptocurrency hype and subsequent downfall of Bitcoin between 2016 and 2019 remain underexplored. We applied ordinary least squares (OLS) regressions based on a dataset containing 1597 ICOs that covers almost 2.5 years. The results show that exogenous and endogenous signals have a significant effect on the funds raised in ICOs. We also find that the Bitcoin price heavily drives the performance of ICOs. However, this hype effect is moderated, as high-quality ICOs are not pegged to these price developments. Revealing the interplay between hypes and signals in the ICO{\textquoteright}s asset class should broaden the discussion of this emerging digital phenomenon.",

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AU - Wessel, Michael

AU - Besler, Markus

AU - Benlian, Alexander

PY - 2022/9

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AB - Initial coin offerings (ICOs) have recently emerged as a new financing instrument for entrepreneurial ventures, spurring economic and academic interest. Nevertheless, the impact of exogenous and endogenous signals on the performance of ICOs as well as the effects of the cryptocurrency hype and subsequent downfall of Bitcoin between 2016 and 2019 remain underexplored. We applied ordinary least squares (OLS) regressions based on a dataset containing 1597 ICOs that covers almost 2.5 years. The results show that exogenous and endogenous signals have a significant effect on the funds raised in ICOs. We also find that the Bitcoin price heavily drives the performance of ICOs. However, this hype effect is moderated, as high-quality ICOs are not pegged to these price developments. Revealing the interplay between hypes and signals in the ICO’s asset class should broaden the discussion of this emerging digital phenomenon.

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