First, it is more costly for a low quality producer compared to a high quality producer to offer a warranty, and it is easily observable Spence , Several empirical studies already assessed the value of quality signals in the context of financial investments in start-ups e. Investments in early-stage ventures are particularly difficult to assess, as information asymmetries are far greater compared to late-stage firms Kirsch et al.
Therefore investors are often confronted with unreliable, less regulated and often handpicked information about new firms, creating a difficult assessment of the underlying true quality Plummer et al. Hypotheses development Considering ICOs through the lenses of signaling theory, there are many indications that signals can influence investors' investment decisions.
In general, investment decisions are decisions made under information uncertainty. In order to reduce these uncertainties and to mitigate existing information asymmetries, IPO emitters provide audited IPO prospectuses and promote comprehensive analyst coverage. In the case of an ICO, these instruments are not available, resulting in comparatively higher information uncertainty among investors Albrecht et al.
Although ICO investors have access to a whitepaper, which like an IPO prospectus, contains information for assessing the quality of the offer, there are decisive differences between an ICO whitepaper and an IPO prospectus: Firstly, the whitepaper is reviewed by individual experts and thus represents an important contribution for investors Fisch and Momtaz However, it does not guarantee that these experts are independent and certified, as in the case of an IPO prospectus Howell et al.
Secondly, the scope and level of detail of a whitepaper are often significantly lower than that of an IPO prospectus, and thirdly, the IPO prospectus contains significantly more mandatory elements than a whitepaper. Fourth, in the realm of ICOs, the reliability of the assessments from self-proclaimed experts are often difficult to judge.
These reasons indicate that the quality assessment of an ICO's investment decision, based on the information provided by the emitter, comes with very high uncertainties. Therefore, it is quite obvious, and also consistent with the signaling theory, that investors seek further signals which provide credible information about unobservable characteristics of the ICO.
ICO accompanying platforms, such as ICOBench, offer investors this information in the form of social information cues, to be precise, as expert ratings. This expert rating includes an algorithmic evaluation by the platform as well as subjective assessments by individual experts and represents an exogenous quality signal Flanagin and Metzger Although the subjective assessment of experts is based on identical information that is also available to the investor, research has demonstrated that the mere nomination of the alleged expert as an "expert" already has a signaling effect on the quality and credibility of the property assessed by the expert Bae ; Flanagin and Metzger ; Huang Lei Effects of the signals on investment decisions are also known from IPOs.
Research on IPOs suggested that investors seek tangible and intangible information about the characteristics of organizations in which they might invest, since this information can be used to dispel concerns about risk and uncertainty Bruton et al. The reputation of experts or underwriters signals the underlying risks of the offering Carter et al.
Consequently, we assume that if supposed expert rates an ICO highly, this rating will influence the investor, who will potentially invest higher amounts in the ICO or be more willing to invest in the ICO in the first place. Therefore, we postulate that positive ratings and evaluations by experts and analysts increase not only the recognition of the project but also the value seen in it.
Hypothesis 1. The higher the expert rating of an ICO, the higher the funds raised. Social media encompasses a group of Internet-based applications that are based on the technology of web 2. The term social media covers discussion forums such as Reddit, microblogging sites such as Twitter, social or professional networking sites such as Facebook and LinkedIn as well as social messengers such as WhatsApp.
All of these social media applications also called platforms differ in their approach and have slightly different unique selling points Kim However, they all have in common that each of them enables companies to easily communicate and interact on digital channels with many users, customers, or private investors Wallbach et al. The content of the communication can thematically be very different. Companies can use these communication channels, for example, for marketing purposes or to announce economic events and thus strengthen their cognitive legitimacy Chanson et al.
Lundmark et al. Their results indicate that the use of social media i. This illustrates that social media enables companies to send signals to customers whose intensity depends on the type of information e. ICOs can be considered as a digitalized copy of IPOs, where the usage of social media platforms is even more intense. Besides having a website, Twitter constitutes one of the most important communication channels Fiedler and Sandner The emitter uses social media channels for important announcements such as the announcement of the issue price, to inform the community about the development of the project or for marketing purposes.
The important role of social media is underlined by the fact that the emitter communicates exclusively through these channels with its investors. The ICO environment also has strong parallels to the crowdfunding environment, which is strongly community- driven Belleflamme et al. For example, both ICOs and crowdfunding campaigns frequently have a large number of investors who become customers or users after a successful campaign Belleflamme et al.
Unlike conventional investors or venture capitalists, community members are willing to share the project on their social media channels in order to promote the project and increase its chances of success Lu et al. Furthermore, the way in which start-ups, emitters or even established companies interact with their consumers and investors has changed significantly with the advent of social media channels, especially communication channels based on connections between consumers, such as word-of-mouth or recommendations are fostered by the use of social media Claussen et al.
Existing research has shown that word-of-mouth in social media has a positive effect on the box office revenues of movies Liu and positive customer product reviews lead to increases in book sales on Amazon Chevalier and Mayzlin Customer product reviews allow consumers to express their opinions in respect to a product or service in a vivid description and thus contain considerably more information than a one-dimensional scale such as a product rating Wessel et al.
The power of digital word- of-mouth through social media is not limited to customer product reviews of existing products. Scholars have also shown that social media can be successfully used for pre-sales or marketing activities, so it is only natural that start-ups and mature companies increasingly rely on social media-based "network" and "viral" marketing strategies Aral and Walker Empirical evidence for the successful use of social media activities on pre-sales in crowdfunding campaigns provides e.
Beier and Wagner , as well as Lu et al. Thies et al. Based on the existing knowledge and the close parallels between these funding vehicles, we posit that social media presence, which represents an endogenous signal, positively influence the success of ICOs. Hypothesis 2. The higher the social media presence of the ICO, the higher the funds raised. Previous research has shown that, particularly in an online context, action-based or behavior-based social interactions can impact others' expected utility for a product or service e.
Action-based or behavior-based social interactions are often facilitated through popularity information PI Thies et al. PI are used to present the decision of previous customers to future customers. These cues can be represented, for instance, in the form of aggregated statistics displaying the number of downloads, as an extensive media coverage of a trend or by an almost empty shelf space of an article in the supermarket.
Many ICO platforms use PI cues as an indicator of the choices earlier adopters made by displaying the sum of the raised funding in order to influence consumers' choices and behavior. Such observable cues can help consumers to evaluate what the most appropriate behavior is in a given situation, because sometimes people, "determine what is correct by finding out what other people think is correct" Cialdini , p.
A possible result that can be produced by the stimulation of PI is that many individuals begin to behave identically Liu Finally, this behavior can cause informational cascades, which represents an information-based description of herd behavior Huck and Oechssler Informational cascades occur when individuals who face identical decisions under uncertainty, can observe the actions of other individuals who faced the same decisions earlier on, but not the motivation behind their actions Bikhchandani et al.
In these situations, individuals will consider their private information as well as the inferences drawn from observing predecessors' decisions. As soon as individuals consider the decisions of other individuals as more informative than their own information, it is likely that they will ignore their information and imitate the actions of other individuals in order to overcome current uncertainty Sun This cascade is increasing, and a possible immediate successor will perceive even more reasons to ignore the own information Yin Previous IS research showed that, due to large amounts of information available about the purchase decisions of consumers online, the Internet is the ideal environment for this type of herd behavior.
Informational cascades have, for example, been found to arise on online microloan markets Zhang and Liu , when adopting software Duan et al. Considering informational cascades in the light of ICOs, they can be a central driving mechanism to explain the behavior of investors on ICO platforms: First, in , the blockchain was promoted as game-changing new technology in all media Weking et al. According to Welch bullish financial markets lead to stronger information cascades.
In times of bullish markets, investors tend towards overpricing assets Chan , and the number of IPOs, as well as the average returns, is unusually high Lowry and Schwert These lead to a rising share price, which leads to a further increase in profits and thus attracts more investors. In both, during the dot-com bubble and the ICO hype, media has reported about incredible share price increases and first-day returns, which attracts new and, above all, less-informed investors.
The lower level of knowledge about the specific investment vehicle leads to the fact that these investors tend to follow the choice of other investors. Second, investors on these platforms are faced with uncertainties when deciding to fund a project. The uniqueness of the project on these platforms highlights this point, as investors rarely have to choose between two similar projects running simultaneously Kuppuswamy and Bayus Third, the value of the promised application or service remains relatively vague at the time of the investment decision, so that investors can only determine its real value after the application or service has been completed and launched Shi and Whinston Fourth, ICO platforms are designed in such a way that it is very easy for potential investors to monitor the level of funding from other investors at any time during the project.
Fifth, even if the outcome of the action of a predecessor is apparent, the actual motives for these actions are not revealed. For these reasons, we posit: Hypothesis 3. In accordance with the insights into the research of IPOs, it is also evident that there is the probability of different market behavior of investors depending on the quality of an ICO. In general, the quality of an IPO or an ICO is expressed by analyst coverage, ratings, or reputation systems, which reduce the possibilities of fraud and help investors make the right decisions.
In the context of ICOs, Lee et al. While doing so, they pointed out that successful ICO has a rating of 3. In detail, they consider an ICO as successful as soon as it has reached the soft-cap. However, by using this binary view successful vs. Moreover, Lee et al. Thus, they neglected a possible interaction effect between the BTC price and the success of the campaign.
However, we assume that the BTC price, which is being cheered on by the hype surrounding the financing vehicle, moderates the influence of the ratings. Footnote 2 In the case of a high BTC price, a herding behavior occurs as postulated in hypothesis 3, which leads to a lower relevance of the reviews for the investor.
In contrast, high quality ICOs will be perceived as individual profitable investments, without being pegged to a superordinate currency like BTC. Therefore, a high quality ICO will be less influenced by hype factors explained which leads to the following hypothesis: Hypothesis 4. Finally, we assume the influence of an ICO's social media presence on users' herding behavior. Social media enables companies to communicate information to investors and investors to share this information with other people.
This leads to an increase in the range of information so that potential investors, who did not deal so intensively with ICO campaigns, will be better informed. Moreover, social media enables companies to be more sensitive to customer's needs Du Helen Gox, BTC, and Bitstamp and concludes that these are 5—7 times higher than what is generally observed in stock markets. Bouoiyour and Selmi , Bouri et al. All authors conclude that the volatility level is comparatively high, offering different explanations such as cyber attacks, information asymmetry, decentralization, or the absence of regulation.
We contribute to the literature with an in-depth analysis of Bitcoin volatility and its implications on the usage of Bitcoin as a currency, a diversifier or hedge, and a store of value. We find that Bitcoin markets exhibit excess volatility in the sense that the volatility is up to 10 times higher than the volatility of the exchange rates. We understand such a high level of volatility as an obstacle for Bitcoin to perform all functions associated with a currency means of exchange, unit of account, and store of value in a reliable and efficient manner.
Also, we find that the dynamics of Bitcoin volatility are different from and unrelated to FX volatility which suggests that Bitcoin does not yet belong to the global market of currencies. The article proceeds as follows. We first describe the Bitcoin market and related regulatory aspects in Sect. In Sect. The empirical analysis follows in Sect.
Section 5 concludes. The Bitcoin market Market characteristics The Bitcoin market is a fully electronic market which has been introduced on October 31, by Satoshi Nakamoto as a peer-to-peer network without any central authority. Hence, there is no central bank or any other single intermediary involved and transactions are verified by a network of nodes that check the accuracy of the latest transaction against their register of total transactions, called the blockchain.
The transaction is subsequently added to the ledger, and information is redistributed to other nodes. This is one fundamental difference. In order for a block to be accepted in the network, miners have to provide proof of authenticity by finding a specific number called a nonce. A hash function which maps the nonce back to an easily verifiable bit string ensures that the block is valid cp.
Antonopoulos
Think, that bitcoin market symbol assured
Metrics details Abstract Initial coin offerings ICOs have recently emerged as a new financing instrument for entrepreneurial ventures, spurring economic and academic interest.
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| What does round robin mean in sports betting | The higher the expert rating of an ICO, the higher the funds raised. Fourth, in the realm of Https://bettingfootball.website/federica-betting/8560-liteforex-pamm-account-alpari.php, the reliability of the assessments from self-proclaimed experts are often difficult to judge. Existing research has shown that word-of-mouth in social media has a positive effect on the box office revenues of movies 00371 btc to usd and positive customer product reviews lead to increases in book sales on Amazon Chevalier and Mayzlin The purchased coins or token typically offers its owner several specific rights, including access to the start-up application, the right to create or develop functions for an ecosystem, or the right to vote on governance issues Chen All of these social media applications also called platforms differ in their approach and have slightly different unique selling points Kim However, only units that are by their nature Bitcoin-like and based on Bitcoin's technology with an own blockchain, node, and miner are coins. |
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| Keltner channel forex factory | Dwyerfor example, analyzes monthly standard deviations of Bitcoin prices from Mt. Nevertheless, the effects of exogenous signals i. The same principle applies to the relationship of investors and investees in financing decisions. Afterwards we outline our research methodology and present our results. These lead to a rising share price, which leads to a further increase in profits and thus attracts more investors. The emitter uses social media channels for important announcements such as the announcement of the issue price, to inform the community about the development of the project or for marketing purposes. The application of the signal theory in consumer research has revealed that consumers faced 00371 btc to usd difficult quality decisions or with situations where information asymmetries exist search for information references which provide actions or artifacts of companies that provide consumers credible information about unobservable product quality Rao et al. |
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| Golf betting spreadsheets | Furthermore, the issue price of the share is determined based on this evaluation. We therefore try to contribute to a better understanding of the influence of different quality signals on ICOs and illustrate strategies to strengthen or mitigate their impact on 00371 btc ICO market. For instance, Fisch exposed that venture characteristics are less relevant for the amount of funding in an ICO, but the underlying technology plays an essential role. The theory is rooted in information economics and contract theory usd advocates that different parties involved in a particular transaction have different amounts of information about the transaction. In order for a block to be accepted in the network, miners have to provide proof of authenticity by finding a specific number called a nonce. For example, investors can only track project progress using the online information provided by the emitter Gleasure et al. |
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