A small ICO trying to make a name for itself went through a token distribution phase that has its investors panicking as the asset’s value plummets.
As midnight closes over Europe and the US starts to settle in for the evening, the community of one particular ICO called EdenChain goes wild. At first, it starts out with a sudden flurry of messages in the coin offering’s official Telegram group.
Messages start pouring in, spammers throw everyone in disarray, people start noticing a sudden drop in the value of the coin, and the administrators that have so far kept the peace are nowhere to be found to provide some light in the middle of this chaos.
EdenChain is supposed to be a complete service targeting Korean customers for companies looking to start ICOs of their own, represented by a token whose value wasn’t that high to begin with. Since the token was listed on CoinMarketCap on September 18, its peak value has beenonly $0.05.
Over time, that value diminished to $0.04 over the course of a week. But the event that proved most calamitous was a sudden jerk that sent it careening into a valuation of $0.03 from $0.035—a 14.2% drop—in the span of a mere 10 minutes as Koreans were turning off their lights.
This price movement didn’t come through an extremely high trading volume; trading that day showed no noteworthy anomalies. There was only one thing that could have really set the whole thing off: An increase of 15% of tokens by 150 million EDN could have sparked the sudden price slump.
Trading volumes and some slight inconsistencies could account for the other 0.8% in the drop.
In its blog, the EdenChain team explains what this token infusion is for.
“The 15% (150,000,000 EDNs) strategic partners allocation was used to bring on board several strategic partners including exchanges and consultants who have helped make EdenChain a success! These strategic partners have been helping EdenChain to make new connections with high-quality startups who might be keen to leverage on blockchain technology to accelerate their growth,” the ICO wrote.
A large channel on Telegram following the cryptocurrency world used this statement on EdenChain’s blog to add fuel to the flames by speculating that this was a strategy to dump the token via artificial inflation by giving away the newly-generated 150 million EDN to the ICO’s partners.
This may have been one of the chief moments that drove some early investors into the project to fall into a panic. However, the channel later corrected the record by adding that the new tokens were “disclosed before the ICO.”
“What they didn’t disclose was that this 150M was going to be sold in addition to the 400M tokens [that were originally in circulation]. So, basically, they confirmed they raised more than their $24M hard cap,” the channel said.
All uncertainty aside, EdenChain promised to address this issue by announcing a new “Ask Me Anything” session on Reddit with James Ahn, the ICO’s CEO.
“In view of the recent misunderstanding regarding EdenChain regarding [sic] circulating supply, we would be hosting an AMA with James Ahn, CEO [of] EdenChain to clarify the questions and doubts that you may have,” the team wrote in its official announcement channel.
Most of the questions in the AMA that we’ve seen so far appear to be from jilted investors who wish to confront the CEO on issues such as the allocation of the funds raised, supply and transparency issues, and plans for the future.
The moral of this story is twofold. For ICOs, it outlines the importance of being able to communicate effectively with one’s investor base to avoid panics and FUD.
For investors, this is a story of prudence and selectiveness—not only in choosing ICOs, but also choosing who to believe when an ICO is spoken about.
At this point, it’s too early to call whether EdenChain was acting maliciously, but members of the team including the CEO are more than welcome to speak to us about this situation. All we can say is that for a company that helps other ICOs bootstrap their projects to experience this kind of calamity three days after launching its testnet, it’s not off to the best of starts in terms of demonstrating the efficacy of its management.
The fact that it is targeting Korean customers yet has to deal with Western investors probably isn’t helping it much, either.