Initial Coin Offerings: Early Evidence on the Role of Disclosure in the Unregulated Crypto Market

Using a global sample of 2,357 attempted initial coin offerings (ICOs), we examine whether ICO rating providers act as information intermediaries that may reduce information asymmetry and the associated adverse selection problem in the crypto-tokens market. We find that issuer-supplied voluntary disclosures alone are not consistently associated with ICO success and post-ICO performance. In contrast, our analysis suggests that ICOs with higher ratings are more likely to succeed in raising funds, and list on a crypto-exchange. They are also more liquid and less likely to crash after the completion of the ICO. Further, we decompose ratings into algorithmic ratings and ratings by crypto experts and find that while algorithmic ratings capture voluntary disclosure quantity, crypto-expert ratings capture assessments of underlying ICO quality. We document that both rating components incrementally predict the success and post-listing performance of ICOs. Overall, our results suggest that information intermediaries have helped the functioning of the unregulated crypto-tokens market.