A Bitcoin (virtual currency) paper wallet with QR codes and a coin are seen in an illustration picture taken at La Maison du Bitcoin in Paris, France, May 27, 2015. REUTERS/Benoit Tessier
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Investors are being drawn in on hopes that such "initial coin offerings" will match or exceed the performance of the first digital currency, bitcoin.First Blood's Zhou does not want to call the company's coin offering an ICO, but prefers to call it a "presale or crowd sale".In deciding whether a coin sale is legal, Peter Van Valkenburgh, director of research at cryptocurrency advocacy group Coin Center in Washington, said it is important to determine whether the token has a useful application, other than for investment.These tokens, whose sales are advertised in different cryptocurrency forums and chat pages, are primarily bought by technology enthusiasts, software developers, as well as institutional and retail investors.Smith + Crown data showed that the bulk of new currencies, launched this year typically dropped after trading on an exchange following their ICO.Of the 28 startups that issued tokens in 2016, about two-thirds have seen the value of their currencies fall below their initial price at the coin sale, said Matt Chwierut, Smith + Crown's research director.Jake Brukhman, a partner at U.S.-based CoinFund, which invests in these currencies, said the number of currencies that have useful applications is fairly small.
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