February 2024

2024-02-11 17:33:13

According to a new study, there is only one thing to look out for when conducting a crypto ICO. This can be the key to an ICO being successful and raising as much money as possible.

Hanken School of Economics University in Helsinki, Finland February 8 study revealed that a trusted appearance can increase investors’ funding amounts in cryptocurrency initial offerings (ICOs) by a whopping 95%.

This is what you need for a successful ICO

In the study, ICOs refer to raising capital to launch a new cryptocurrency-related product or service. This process is similar to the initial public offering (IPO) of stocks.

How does the ICO team influence investor decisions?

Professor Sinh Toi Moi used machine learning to examine the facial features of 5,826 individuals participating in ICOs. His goal was to gain insight into how these external characteristics influence perceived trustworthiness.

The results showed that the average amount raised by crypto ICOs in the top quintile of trust was around $2.91 million (95%) higheras the amount raised by ICOs in the bottom confidence quintile.

The study suggests that:

…however, investors’ perceptions of face trustworthiness may be misleading and investors may be affected by behavioral biases, namely the from the halo effect they can suffer.

A halo effect a psychological problem in which people associate a general favorable impression of an individual with other positive traits.

The downside of reliability – for investors

Even though face trust had a positive effect on the ICOs studied, it did not always end positively for investors.

The study revealed that face trust is negatively related to a token’s cumulative return following an ICO. The correlation suggests that investors who overvalued ICOs in initial funding periods are trying to oversell their tokens. This is how they try to reverse their excessive investments.

Professor Toi Moi believes his research is consistent with previous psychological studies that show investors do not make rational decisions, but are biased and can be misled by facial impressions.

The less information the better

The study, which was one of the first to uncover individual investor bias in the crypto ICO market, also noted that individual investors may overcompensate for a lack of understanding of some technical aspects of ICOs with more readily available information.

Further studies show that the effect of face trustworthiness is stronger when ICOs publish less technical information or publish less complex white papers. The result is consistent with previous studies and suggests that investors trust facial impressions more when they have less fundamental information regarding ICO products.

Although not detailed in the study itself, these results may be closely related to why fraudsters are able to raise even significant funding during cryptocurrency ICOs.

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