The 90% drop in crypto markets in 2018 and rising number of frauds involving ICOS, has unsurprisingly affected crypto startups looking to raise funds via initial coin offerings (ICO). While things are stabilizing, it’s still not enough to lure the investors back to markets especially to the ICO market. Resultant the crypto ICO funding has seen a drop to its lowest in the last 17 months.
ICO frauds contribute majorly to the drop in ICO investment
According to a recent research report published by Autonomous Research, Startups have raised less than $300 million in September, the smallest amount since May 2017. This is a 90 percent drop from the peak amount of about $3 billion accumulated through digital-token sales in January. In the report, the firm wrote
“Last month saw about $300 million in ICO funds raised, with the month before that revised to a bit over $400 million, a far cry from the $2.4 billion in January of this year. If we include EOS and other chunky private token raises, the highs go to over $3 billion, suggesting that monthly ICO activity is down 90%.”
The firm continued to note that
“There is indeed a lagged effect in the venture as well, with increasing drips of capital, reaching over $1 billion in August 2018”
The drop in ICO investment was majorly associated with ICO frauds which have crippled the investor sentiment in primary crypto markets. According to a study conducted by ICO advisory firm Statis Group, more than 80 percent of initial coin offerings (ICOs) conducted in 2017 were identified as scams. The study took into consideration the lifecycle of ICOs run in 2017, from the initial proposal of a sale availability to the most mature phase of trading on a crypto exchange. The analysts further found that four percent of ICOs failed, and three percent had “gone dead.” The study recognized ICO death as “not listed on exchanges for trading and has not had a code contribution in Github on a rolling three-month basis from that point in time.”
Another research conducted in early September by GreySpark Partners Also shared the same sentiment. The firm published its report claiming “nearly half” of all cryptocurrency startups, 890 token issuers in total, raised no funds in 2018. Over 40 percent of ICOs (790 firms), however, raised more than $1 million in a comparable period. Similar to Autonomous report, GreySpark Partners also stated the disappointing figures may be a mix of “lack of traction, disappointing product advancements, scams, difficulties in execution, no market and poor marketing or go-to-market strategy.”
While the regulations are still to fall in place for ICO’s, it seems unlikely that investors would want to risk their monies in ICO’s unless the project is very credible. Investors would be just keeping their fingers crossed for ICO regulations to come in globally so they can easily invest into the multi-bagger market of ICO.
Will regulatory changes help the ICO market to grow? Do let us know your views on the same.
Nilesh Maurya has been associated for past 8 years as an Investment Banker with Omega Capital, a bespoke Investment Banking outfit having offices in Mumbai, New York, Singapore, and Dubai. He has been a regular contributor to business publications such as Business India and Market Express and has been a mentor to many start-up companies. Nilesh Maurya has been associated for past 8 years as an Investment Banker with Omega Capital, a bespoke Investment Banking outfit having offices in Mumbai, New York, Singapore, and Dubai. He has been a regular contributor to business publications such as Business India and Market Express and has been a mentor to many start-up companies. Follow him on Twitter at @KoinKing1 or connect with me on linkedin.