More than two-thirds of small-cap cryptocurrency tokens distributed through initial coin offerings (ICOs) are currently worth less than the startups that issued them raised through their crowdfunding sales, a newly-published report has found.
Small-Cap ICO Tokens are Hemorrhaging Value
According to the report, which was compiled by cryptocurrency research firm Diar the 562 ICO tokens ranked outside of the 100 largest cryptocurrency market caps have collectively lost $5 billion in nominal value against what these sales raised for the funding teams, with 70 percent of individual tokens seeing losses.
Remarkably, that massive shortfall does not even include the value of the tokens reserved for the development team or otherwise not made available through the ICO, which in some cases would make that post-ICO performance appear even more dismal, depending on how many of those reserved tokens have entered circulation.
Remarkably, slumping returns do not seem to be scaring away investors, even as overall consumer interest in cryptocurrency has reached a relative low-point. Estimates on ICO fundraising vary wildly, but CoinSchedule, which has recorded data from 789 token sales held this year, estimates that blockchain startups have collectively raised more than $20 billion in 2018.
Those particular figures may be somewhat generous — they take Venezuela’s claim that the state-backed petro cryptocurrency raised $735 million at face value, for instance — but, even so, they suggest that not even a bear market and increased regulatory enforcement can quell interest in this nascent fundraising model. If CoinSchedule’s data is even moderately accurate, ICOs have raised more than $1 billion in every month except August and July, a mark that token sales hit only twice in 2017 en route to a yearly total of $6.2 billion (The $4 billion EOS crowdsale began in 2017, but it is credited to 2018 since that is when the ICO concluded).
That said, even as ICOs have collectively raised an impressive sum in 2018, individual projects have often struggled to meet their fundraising targets. According to CoinSchedule, just 20 token issuers have exceeded their targets, while 402 — 51 percent — have raised less than half of their goal.