There are a lot of people who got excited when Bitcoin was about to hit $20K. Unfortunately, regulations have caused a bearish trend for Bitcoin and other cryptocurrencies. Initial coin offerings became popular in 2017 and 2018 considering the potential to earn from its volatility. In fact, during the first three months of 2018, initial coin offerings were able to raise $6.3 billion which is already 118% of the entire amount raised in 2017.
However, looking at the controversies surrounding ICOs, it has been discovered that one in every five ICOs is considered a scam.
Today, around two-thirds of small-cap cryptocurrency tokens are now worth less than its original value when the startups started issued them.
Small Cap ICOs Losing Value?
In a report that was compiled by crypto research company Diar, around 562 ICO tokens have ranked outside of the top 100 biggest cryptocurrency market caps. Collectively, these tokens have lost around $5 billion in nominal value compared to the original sales that have been raised. 70 percent of individual tokens have been seeing losses.
If you are going to take a closer look at the cost that covered the developmental cost of the tokens, the numbers would’ve been more dismal. If you will look at the top ten losers, Sirin Labs was able to raise $158 million but only has a current $17 million market cap. That’s equivalent to $141 million loss.
Sirin was a startup developing a “blockchain phone”. However, what contributed to Sirin’s poor performance is the fact that there’s an unexpected competition in its niche. HTC also planned to release its own blockchain phone that was then dubbed as HTC exodus.
Aside from Sirin, PumaPay is another ICO that has been able to raise around $117 million only to have a current market cap of just $15 million.
And the problems for ICOs don’t end here. You also have 324 tokens that are still not yet listed to any of the hundreds of crypto exchanges. Collectively, that’s equivalent to approximately around $2.3 billion in terms of funds raised.
ICOs Raised Over $20 Billion in 2018 Alone
Despite the bearish market, ICOs have taken off this year. It has been estimated that blockchain startups this year was already able to raise more than $20 billion. And the year isn’t over yet. You already have around 789 token sales this year alone.
What this means is that investors are more than willing to participate in the crypto market just to see one or two projects give them the profits that they are looking for. And this makes sense. Though ICOs have shown dismal losses, you also have cryptocurrencies that have provided its early investors with massive returns. If you will take a closer look at IOTA, Tron, and NEO, these cryptocurrencies have collectively raised around $137.3 million. However, these tokens already have a combined value of around $6.4 billion. That’s an ROI of around 4,500 percent.
With regulatory changes happening and some regulators in some countries now taking a closer look at ICOs, will this trend continue in the future? Or will it be more difficult for startups to raise funds using ICOs.