Cryptocurrency was in bloom in 2017. This lead to a huge growth of startups announcing ICOs. Due to the statistics, ICO gathered over $5,6 billion in 2017. Sounds quite promising, right? But the truth is that the bigger half of the projects disappeared and couldn’t take the pressure. Let take a closer look at the current situation on the market and try to predict its behavior for 2018.
Read more about an ICO industry in our new article Choosing the best ICO to invest in.
What do the statistics say?
Economists made a research and it turned out that 418 out of 909 publicly published coins (which means 46%) failed, 142 didn’t manage to finish the ICO and 276 stopped their work after the ICO. These projects couldn’t make it, but there are still 113 startups which are keeping quiet and are not responding to any media or users inquiries. Thus, the amount of unsuccessful ICO is even bigger.
It seems absolutely normal for any SME – you try, you fail, you give up. But startups that go for an ICO are failing more often. Let’s try to figure out the reason.
There are some general suspicious features which must be taken into account while estimating the potential of the crypto-related project.
Features that show that the ICO will collapse
1. Bad idea and its implementation
While choosing the ICO to invest into, try to imagine whether it will bring value and solution to the world or not. Unfortunately, many startups build products and services for solving unexisting problems.
Silber Pfeil and Mercedes cooperation is an excellent example. A loud brand is not enough to raise money.
For sure, rewarding people with tokens for sales is a good idea. But not when people don’t need them. At all. The creation of a specific token for buying one specific energy drink is not practical at all. Eventually, the product couldn’t attract any investments and failed.
2. Technical issues
Many projects launched in 2017 faced problems on the technical side. Two main and the most popular troubles are still related to the scaling and the security of the products.
The prize for the biggest fail is received by DAO — product launched in 2016 which had the lowest security level ever.
Having attracted 11,5 million of ETH, the project that highlighted its transparency and decentralization, lost 3,6 million of coins after a hacker’s attack.
After DAO many startups paid more attention to their security and the promises they make.
Thus, understanding all the technical aspects is a huge advantage, but it’s not always enough. So, have a closer look at the technology of the project, study the matter and only after that decide on investingino it.
3. Regional orientation
Cryptocurrencies are aimed to create a global financial network. But it’s popularity is not the same all over the world. Thus, in the developing countries, the amount of the successful projects is considerably lower than in the developed ones.
Researchers show that Africa is an absolute leader in the failing ICOs. Let’s take Tingo Coin – the company that wanted to become the first blockchain based agricultural project in Africa. Besides its many drawbacks (the lack of experienced team members, its small size etc.), the main problem was still its goal and ambition to become the one and only in just one region.
The amount of investors in Africa is so small, that it would hardly be possible to reach even the soft cap.
Investors from Canada won’t care about the agricultural opportunities in Africa. When you create a specific way of using your tokens and limit it with geographical boundaries, you are ought to fail even before you start.
Startups that want to conquer the whole globe can also face the fiasco. But those which have strong limits truly have more chances to lose.
So, what’s next?
Investing into any ICO is a risk, so you got to be really attentive while choosing your opportunities. No one is guaranteed to win, even the most promising startups can collapse. Make sure to create a long-term strategy if you want to play till the end.
The initial coin offering marketing continues to develop.
Will there be mo fails in ICOs? Hell yes! But it doesn’t mean that you have to stop investing.
The growing number of ICO is an indicator for you to choose wisely and carefully for the most perspective project to invest.