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Alex Kimani

Alex Kimani

Writer, Divergente Research LLC

Alex Kimani is a veteran finance writer, investor, engineer and researcher for Divergente Research LLC and Safehaven.com. 

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The ICO Walk of Shame: 50% Dead On Arrival

BTC

Initial Coin Offerings (ICOs) are rapidly turning into a space where money goes to die, with almost half of new tokens already dead and over 100 on life support.

A total of 418 of 902 blockchain-backed crowdsales tracked by TokenData in 2017 have already been buried, and another 113 are currently on life support.

Over 140 ICOs failed before they raised any money. But even worse, almost 280 failed after they raised funds.

Some of them were pure scams, others saw their creators make away with the money raised, and still others faded quickly into obscurity because no one was interested.

The seemingly depressing data indicates that these white elephants still managed to raise over $233 million among them, even when many looked sketchy from the outset.

If you count those 113 ICOs considered to have one foot in the grave, we’re looking at a 59 percent rate of failure.

It sounds dire, indeed, but keep this in mind: Traditional venture funded startups have a failure rate of 75 percent, Fortune points out.

So why are we so nervous about ICOs?

In part, it’s perhaps because the crypto craze, thanks to the media, reminds us all of the dotcom crash. But it’s also because as an ‘industry’, and even as a currency medium, the fact that it only exists in the ether makes it that much more frightening. Related: Chinese Telecoms: Competition Or National Security Threat?

Despite our fear of the unknown, ICOs are certainly in vogue. They’ve overtaken traditional venture capital as the preferred method for startups to raise funding.

(Click to enlarge)

Source: Business Insider

(Click to enlarge) 

Source: CoinDesk

ICOs are in good company, too--the list of failed cryptocurrencies runs into the hundreds as the digital graveyard continues to claim casualties.

The cryptocurrency market is now approaching three-quarters of a trillion dollars after growing nearly 20 times in size in 2017, while the ICO market continues expanding at a frenetic pace.

And for many right now, it’s eerily reminiscent of the infamous dotcom crash of 200, when the economy was chugging along with thousands of sexy internet-based companies popping up right, left and center until the bubble burst, wiping nearly $2 trillion off the stock markets in months.

The combined crypto market is nowhere near as big as the $6.7 trillion-valuation of the stock market prior to the March 2000 crash. Still, it's big enough to cause a panic selloff in tangentially related markets if it was to crash, not to mention leaving many people languishing in the poor house.

But all of this data also ignores the ICO success stories. After all, they raised $5.6 billion last year alone. The trick is that the 10 largest sales accounted for 25 percent of the total capital raised in 2017.

By Alex Kimani for Safehaven.com

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