By Pavel Leonov
In the brave new world of ICOs, things change very fast. Let’s take Polybius, an Estonian company that raised money to start a bank for the cryptocurrency era.
Less than six months ago, Polybius was one of the hottest ICOs in town, raising $31million in just a few days.
Polybius issued 3.6 million Polybius tokens, receiving from investors 6,146,368 US Dollars, 5,438,569 Euros, 4,219 Bitcoins, and a couple of million dollars worth of other cryptocurrencies.
As far as ICOs go, Polybius did everything to the highest crypto-standard. Its blockchain technology was developed by a reputable Estonian company called HashCoin. Polybius assembled an impressive team of managers and advisers, including several senior executives from Ernst & Young office in Switzerland. Polybius was even featured in a Wall Street Journal article about ICOs as an example of a well organized offering. WSJ noted that Polybius provided its investors with a prospectus, the detailed description of the offering that is not required for an ICO, but which is obligatory for traditional Initial Public Offerings.
Implementation details aside, Polybius strategy also seems to make a lot of sense. The potential market for financial services that involves blockchain is very large, and Polybius is the first serious entrant into this market in Europe. Polybius business plans aims to start with a payment system, and then expand into commercial banking, small business financial services, and eventually into venture investing, crowd funding, insurance and brokerage. This is an opportunity-rich field, and some well established financial institutions, including JPMorgan, are actively exploring the idea of developing financial serving on the basis of block chain.
So, in summary, Polybius ICO was based on a sound idea, it was well executed, it raised sufficient amount of money to get the business going according to plan. And Polybius token holders will benefit from the success of this business in accordance with a very clear formula. According to Polybius’s charger, 20% of the profits generated by the business will be directed to pay dividends to the holders of the Polybius tokens, and the number of tokens is limited by the charter.
So, this all sounds sensible, right?
But how did the market reacted to what seems like a solid Initial Coin Offering?
With a big yawn. Immediately after the ICO, the price of Polybius tokens started falling below the ICO price of $10. PLBT now trades at $3.6 per token or nearly 70% below the issuance level.
What really happened?
Why did Polybius go from a poster child to a bad ICO case, that is now quoted by other ICO candidates, typically in a sentence that starts with the words “This is not Polybius…”?
First, it should be noted right off the bat that Polybius had done nothing wrong, at least not to ICO Buffer’s knowledge. We believe that the money that Polybius raised still sits into its dollar and euro accounts and in one or several crypto-wallets.
Second, it should be mentioned that the fall of the price of Polybius token is not related to the cryptocurrency market. The cryptocurrency craze has continued largely unabated, and the price of Bitcoin had recently hit another all-time high, rising above $5,000.
Third, it seems that since the ICO, the management of Polybius continued to execute well. New people had been hired. European banking license had been secured. The start of operation was announced for January 2018.
So, if the situation in the crypto currency market or the development inside Polybius do not explain the decline of PLBT, what does?
Here we are entering the real of speculative propositions, but a few points can be made with sufficient certainly.
The selling of PLBT has been limited to a small number of token holders. The daily volume of PLBT is no more than $150,000, and 99% of PLBT tokens are still held by the original buyers. This means that Polybius investor base, as a whole, has not given up on the business.
Those who sold PLBT probably reinvested their money in another crypto-currency. In this white-hot market, the name of the game has been to identify big winners, like Ethereum that has appreciated by 40 times in less than a year.
So, it is reasonable to suppose that PLBT price wend down because a small number of aggressive speculators concluded that Polybius business model is too conservative to provide for many-fold price rise in a short period of time.
PLBT sellers are certainly correct about that. Polybius’s business is too, well, normal, to feed a speculative frenzy.
But the other side of this coin, no pun intended, is that when the ICO market deflates, the price of Polybius token is like to hold up better than many other ICOs.
As Warren Buffet famously said, you know who is swimming naked only when the tide goes out.
So, we need to wait for the inevitable ICO market correction before a sound judgment on Polybius can be passed.
So far, the answer to the question of what Polybius did wrong is very simple. Nothing.
As for the 70% drop in PLBT price, any investor in cryptocurrency should accept that as normal.
After all, Bitcoin suffered a number of corrections of similar magnitude, and every time it recovered.
PLBT may also recover. But in any case, the original buyers of Polybius tokens are in for quite a ride.