Research Paints Bearish Picture For ICO Market
It goes without saying that initial coin offerings, better known as ICOs, haven’t performed well in 2018’s crypto market, which in and of itself has performed dismally in the eyes of optimistic speculators. Regardless, a recently-released report from ICO Rating, a leading crypto research/data analytics startup, has only cemented this sentiment.
ICORating’s analysts have released their trademark quarterly report for Q3 2018. The ICO Market Research report is a comprehensive analysis of the trends and latest developments in the market
— ICORating (@ICORating) November 16, 2018
In the 67-page report, the firm outright noted that “Q3 2018 was not as successful as Q2 and Q1 for ICOs,” adding that this subindustry’s performance was an overall disappointment. Even ICO tokens that saw boatloads of interest in 2017, such as EOS, fell, indicating that this subset as a whole has suffered, and greatly at that.
Backing its claims with hard statistics, the research company explained that $1.8 billion worth of funding had been siphoned into 597 projects in the past three months While this figure may seem jaw-dropping, when compared to the funds raised in Q2, the $1.8 billion may seem like nothing but a drop in the bucket, as it were.
More specifically, throughout this year’s 2nd quarter, ICOs raised $8.35 billion, even though the market was depressed during that time.
And on a case-by-case basis, projects haven’t been doing too well either, with ICO Rating drawing attention to the fact that only 57% of projects were able to raise more than $100,000 a pop, with only 4% of announced ICOs (a mere 24) gaining a spot on public exchanges.
These dismal statistics only accentuate the fact that 76.15% of ICO-funded projects reportedly had “nothing but an idea,” which is a sad, but common theme in any budding industry, crypto and blockchain included.
Reasoning why projects suffered throughout the past quarter, ICO Rating drew attention to “a significant drop in returns (bear market),” decreasing levels of transparency from teams, the maturation of investors/funds, failure to innovate properly, slow blockchain/crypto adoption rates, and, arguably most importantly, the fact that regulation has been ramping up against ICOs in recent months.
Just recently, as covered by Ethereum World News, Airfox and Paragon came under fire from the U.S. Securities and Exchange Commision (SEC) due to the fact that the two startups failed to register themselves with proper regulators. Speaking on this case, an SEC representative noted:
We have made it clear that companies that issue securities through ICOs are required to comply with existing statutes and rules governing the registration of securities.
Airfox and Paragon have since been mandated to pay a $250,000 fine and to compensate investors who participated in their illegal token sales.
This case is only the edge of the iceberg, because as ICO Rating put it:
The key problem with ICOs is that a vast number of them are scams or scam-like projects, and the fact that some tokens sold were actually securities. In July 2017 the SEC published a report stating that most, if not all tokens should be classified as securities, and thus are subject to the relevant regulation.
The firm also drew attention to scams, noting that 19% of “projects with previously announced ICOs” deleted their websites and social media platforms throughout Q3, which isn’t a good sign considering that ‘only’ 9% disappeared in Q2. These scams reportedly collected $62.1 million.
Although this subindustry underperformed and is rife with scams, there were still projects that stood out like diamonds in the rough. The London Football Exchange, Cryptosolartech, Alchemy, and 4NEW all generated $40 million+ worth of funding, while 16 others raised more than $20 million, which isn’t a sum to scoff at.
Title Image Courtesy of Sharon Mccutcheon On Unsplash