Verge’s impromptu crowdfunding: odd timing, potential for backfiring, example for short-term financing and two approaches towards diffusion
Today’s (3 April) top five currencies based on 24 h change (according to coinmarketcap.com) were (% change in brackets)
- Verge (54,82%)
- Steem (25,64%)
- Lisk (24,94%)
- WAX (23,95%)
- Dentacoin (17,52%).
Most notably is Verge with their about 55% change.
Whereas such spikes happen to be random — or at least without any ‚fundamental’ reason — there are a few things that might provide some explanation for what is going on.
Verge’s crowdsale as the reasons for the price spike and oddly timed crowdsale
Verge is a privacy cryptocurrency (i.e. a currency with focus on privacy) that has been trading since 25.10.2014. Based on that they are among the older privacy coins and based on market cap they are — currently — second biggest privacy coin.
Now, about two weeks ago (22 March) Verge announced a public crowdsale (see image below) asking for donations of 75 Million XVGs (back then worth about $3 Million, as of today some $5,4 Million). The crowdsale was scheduled to last five days (until 26 March) and the proceedings are supposed to be used to establish a certain partnership.
Whereas that initial announcement doesn’t explain clearly the crowdsale’s actual goal — it suggests that the partnership is already final — a reply by Verge (see below) clarified that they „will not achieve the partnership if“ they “don’t have the funding for integration“.
Verge was successful and reached their goal and Sunerok their lead developer (see link) commented on it in a YouTube video (see below). The partnership will be announced mid April.
Now, if we were looking for a causation behind the recent price increase we might find it in the crowdsale and the anticipation of the partner. However, there are a few other interesting things we should look at as well. In regards to the crowdfunding in particular it is odd that it seemed so Impromptu and that the time frame was so short. It would be interesting to know why they needed that much money in such a short period and why the whole process was not done with less potential to create FOMO.
That being said, Verge’s crowdfunding has also a few points for the industry in general.
Potential backfire if disappointing announcement
For starters, there is the fact that revealing such an announcement can backfire in two ways. First, financially. If the partnership is not as great as anticipated the price might plummet. However, if we consider (and I believe we should) the long-term picture such a price fall is only partially relevant and the bigger threat is a loss of trust.
Einsteinium — ticker EMC2 — for instance, suffered through both crisis — fall in price as well as fall in trust. Back in Q4 2017 Einsteinium promised a “mind-blowing” announcement.
However, when that announcement didn’t met investors’ expectations price as well as trust fell. They made the announcement on November 30 and the announcement on December 19. The price went from 0,430083 on November 30 to 1,89 on December 19 and down to 0,781581 on December 31. Currently EMC2 is trading at 0,212039.
In regards to trust it merits to look at the replies to their latest tweets; they are still being considered fake, scam and labelled “mind-blowing”.
Verge’s crowdfunding as one example for quick short-term cash infusion
The other thing wort-noting is the nature of that crowdsale:
- little effort
- quick (five days)
- lot of money ($3 Million)
Although we have seen other projects raise more money in a shorter time period through ICOs these ICO-funding times don’t account for all the work these projects did before the actual ICO.
In the case of Verge all that pre-ICO work was already done and raising money was equivalent to simply waiting five days. It goes without saying that there were some marketing and possibly legal considerations involved but all the infrastructure (the platform, the listing on the exchanges…) was already in place.
Looking at it from a „use case“ perspective that means that when a company quickly needs money for, for instance, a project it would simply post a tweet and five days later have enough money to finance that very project (oversimplification for sure, but it conveys the point). Not even established companies with a great track record can get that much money in such a short period from their bank through an overdraft facility or any other short-term financing option.
Conceptually it is similar to an ICO, but the fact that the all the infrastructure is already in place and such crowdfundings can be done almost „impromptu“ differentiates it from an ICO and makes me wonder how that will swap over to other projects.
Verge’s approach towards crypto adoption — marketing — as one of two strategies towards diffusions and industry-wide timing of marketing activities
Looking at cryptos in general (currencies and tokens) we could separate their strategy towards promoting adoption in two categories; marketing-oriented and technology-oriented. The marketing-oriented groups sometimes appear to be riding the hype train without having the technological basis emphasazing allegedly phenomenal returns and similar. This was — at least in my opinion — visible during the 2017 end-year roundup. The technology-oriented groups are those that spend most of their time and money coding. (To be clear I am not putting Verge into either category.)
This being said, I am curious how Verge and other currencies will distribute their efforts between technology and marketing and if they will sell and promote themselves through their partners and „brochures“ or code. In fact, if we were to put that in terms of an industry life cycle we would see how companies in general tend to go from focusing on R&D and engineering to putting more emphasis on marketing the more the industry matures. Verge’s crowdfunding doesn’t, of course, represent a shift in the industry life cycle towards marketing but it is still interesting in the timing-context. On the one side we could argue that they are one of few privacy coins actively doing marketing, on the other side I believe that crypto projects in general (not only privacy coins) would still be better off putting more time into the technology than marketing.