Abstract
Initial coin offerings (ICOs) represent a novel funding mechanism where digital tokens are issued on the blockchain and sold to investors. One major reason for the success of this financing model is the fact that the issued tokens can immediately be traded on secondary markets. This event study analyzes 250 exchange cross-listings of 135 different tokens issued through ICOs on 22 cryptocurrency exchanges. We find significant abnormal returns of 6.51% on the listing day and 9.97% over a seven-day window around the event. Further analysis shows that the results clearly differ for individual cryptocurrency exchanges, as listings on individual exchanges yield returns of up to 34% on the event day, while others are negligible. An investigation of liquidity-related metrics shows that lower prior trading volume and asset market capitalization have positive effect on listing returns. Investors use phases of high market liquidity to sell off positions around the period of cross-listing events. The results on the cross-listing effects of ICOs may be of relevance to investors/traders, ICO projects, cryptocurrency exchanges and regulators.
Highlights
Initial coin offerings (ICOs) provide ventures with an alternative tool for corporate financing
We aim to explore how ICO tokens perform in exchange cross-listings and whether specific cryptocurrency exchanges or liquidity-related characteristics—in line with signaling theory
For 3, 5, and 7-day windows around the listing events, we identify positive and highly significant cumulative average abnormal return (CAAR), which increase with the length of the event window
Summary
Initial coin offerings (ICOs) provide ventures with an alternative tool for corporate financing. Meyer blockchain-based digital tokens that represent some form of (future) value, and many ICO investors have already made a fortune or total loss. One of the main reasons for the success of ICOs is the fact that tokens can be traded on secondary markets as soon as a cryptocurrency exchange agrees to list them. A special feature of cryptocurrency markets is that there is virtually no order routing through brokers; instead, the assets are traded on a large number of different exchanges, each of which has its own specific characteristics and user base. One speaks of a cross-listing when an asset, which is already tradable on at least one secondary market, is listed on another secondary market—in the case of ICOs tokens cryptocurrency exchanges. Cross-listings never represent the first opportunity but a further option to trade an asset
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