Bloomberg reports that August has been the hardest month for crypto projects trying to raise funds via initial coin offerings (ICO) in quite a while. The data, compiled by Autonomous Research, revealed that crypto startups raised $326 million last month, a yearly low by some distance – over 1 billion USD. During the crypto boom at the beginning of the year, new crypto projects raised $3 billion on average.
According to researchers, ethereum-based ICOs have fueled the initial surge in late 2017, increasing the ETH price at the same time. However, they are viewed as the main culprit right now, as numerous projects have failed to deliver on their promises and have tried to cash out due to concerns that the current bear market will prolong into the next year.
ICOs have started to emerge as a new and trendy way for startups to fund their projects back in April 2017 as it allowed blockchain projects to pool investor money without the regulatory burdens of initial public offerings (IPOs). The ICO explosion added fuel to the rapid increase of the entire crypto industry in late 2017, as blockchain projects raised $2.3 billion in December and over or almost $3 billion the next 3 coming months.
The ICO industry soared so much that the crypto project funding in the first quarter of 2018 has already surpassed that of the entire 2017. However, the dip after such an unprecedented surge was inevitable with the blockchain startups struggling to convince investors, partly due to well-documented issues related with ICOs, such as regulatory uncertainty or fraud.
It is worth having in mind that the figures behind the ICO surge of early 2018 were somewhat inflated by a number of high-profile ICOs, the largest being block.one (the company behind EOS) raising almost $4.2 billion. Other notable ICOs include the messaging app Telegram ($1.7 billion) and the controversial oil-backed stablecoin Petro, a pet project of the Venezuelan dictator Nicolas Maduro. His claims that Petro raised $735 million during pre-sale are unconfirmed.
Some countries, China being the prime example, have banned ICOs entirely, citing the need to protect their citizens. Other governments have taken on more sensible measures, enforcing mandatory KYC/AML procedures and other regulations taken from the world of traditional finance and tailored to the nascent crypto industry.
According to another recent research on ICOs, 890 token sales in 2017 and 2018 have failed to raise any money at all, while 743 projects managed to reach the $1 million mark. An overwhelming 86 percent majority of tokens used ethereum blockchain as their underlying platform. The research firm GreySpark Partners noted that many projects fail to provide a positive ROI (return-on-investment), which might be another reason for investor passiveness.
According to the researchers, “The percentage of ICO projects showing positive returns significantly declines the more time passes after an ICO. The reasons vary: lack of traction, disappointing product advancements, scams, difficulties in execution, no market and poor marketing or go-to-market strategy.“
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I have been following the crypto markets since mid 2017, just in time to witness the incredible surge of the digital asset industry. Fascinated by the potential of blockchain technology I’ve started to dig deeper and that’s how I ended up meeting the Toshi Times team. I hold a Political Science degree, therefore the crypto regulation development is particularly interesting for me. I’m also heavily involved with music, running my own label, a YouTube channel and working with distribution. People call blockchain the ‘Fourth Industrial Revolution’ and I believe it will change our daily lives in the coming years and we will have the front row seats to witness it.