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Initial coin offerings and the cryptocurrency hype - the moderating role of exogenous and endogenous signals

Author

Listed:
  • Ferdinand Thies

    (University of Liechtenstein)

  • Sören Wallbach

    (Technical University of Darmstadt)

  • Michael Wessel

    (Copenhagen Business School)

  • Markus Besler

    (The DLT-Markets AG)

  • Alexander Benlian

    (Technical University of Darmstadt)

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.

Suggested Citation

  • Ferdinand Thies & Sören Wallbach & Michael Wessel & Markus Besler & Alexander Benlian, 2022. "Initial coin offerings and the cryptocurrency hype - the moderating role of exogenous and endogenous signals," Electronic Markets, Springer;IIM University of St. Gallen, vol. 32(3), pages 1691-1705, September.
    • Handle: RePEc:spr:elmark:v:32:y:2022:i:3:d:10.1007_s12525-021-00460-9
    DOI: 10.1007/s12525-021-00460-9
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    More about this item

    Keywords

    Initial coin offering; Cryptocurrencies; Signaling theory; Fundraising;
    All these keywords.

    JEL classification:

    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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