Telegram ICO struggles with limited trader appetite and regulations

Posted: 26 March 2018 11:49 am
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Insiders say the Telegram ICO is still on track, despite shrinking trader interest and government pressure.

The Telegram ICO is broadly on track, but experiencing some issues with limited trader appetite and regulatory pressures, say two insiders to Arabian Business.

Telegram is defined mostly by its end-to-end encryption of messages and has become the primary community organisation and messaging platform in the cryptocurrency world. When it announced that it would be launching an ICO, everyone paid attention.

So far it's shattered all records for money raised by an ICO. It set a $750 million limit for its first round, but swiftly broke through it to raise $850 million – far more than any other ICO to date. Not content, it then moved for another second round pre-sale that aimed for another $850 million. In the first round of pre-sales, tokens were going for $0.38 each, according to a filing, but the second round is bumping prices up to $1.33 per token.

This is where Telegram stands now. It's in the surprise second round of pre-sales with prices more than tripling from the first round, and according to the insiders, it is on track to reach its $850 million target. However, the same insiders also said that demand was noticeably lower in the second round, and that the second pre-sale round has been extended to give some traders time to produce the funds.

At the same time, Telegram is under the pump from Russian regulators to provide its encryption codes to the Federal Security Service within 15 days and risks being blocked under anti-terrorism laws should it fail to comply. It previously lost a bid before Russia's Supreme Court to keep the codes to itself. Completely encrypted and private communications are the bulk of what Telegram does, so being forced to hand over the access codes might be problematic.

Despite the huge amounts of money put into it, the Telegram ICO has attracted a lot of criticism from within the industry. It has made a lot of ambitious promises but has been criticised for being light on technical details, leading some to speculate that the ICO is mostly just to raise as much money as possible to help pay Telegram's operating costs and keep it free to use.

Industry experts have said that the more experienced blockchain-centric institutional traders are giving it a miss, citing issues such as the lack of technical details, inconsistent offerings and general fishiness, and that most of the funds are coming from traders without much cryptocurrency experience.

With limited trader appetite on one side, a regulatory deadline on the other and questions about the actual technical feasibility of Telegram's ICO in-between, there might be trouble on the horizon, despite the enormous amounts of money raised.

Disclosure: At the time of writing, the author holds ETH, IOTA, ICX, VEN, XLM, BTC and NANO.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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