ICO Funding Model Feels Out of Date as Funding Continues to Slow

As the cryptocurrency bear market begins to end, ICOs seem to be dying down rather quickly despite having surpassed the total raised in 2017 in just eight months.

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As the cryptocurrency bear market begins to end, ICOs seem to be dying down rather quickly despite having surpassed the total raised in 2017 in just eight months.

ICO Funding Model Feels Out of Date as Funding Continues to SlowICOs witness massive growth in 2018

With the rise of Bitcoin price last year, a lot of cryptocurrencies sprung up towards the end of the year. This led to the ICO industry recording massive growth in November and December last year. ICO projects raised a total of $6.1 billion in the entirety of last year.

Eight months into 2018 and funds raised from ICOs have already surpassed that raised in 2017. By May, ICOs have raised $6.8 billion. ICOs like that of Telegram helped the market attain such high figure.

However, the market sentiment towards ICOs has been on a decline since January. In March ICOs collected $2.95 billion. However, in April they didn’t even cross $1 billion. The figures have continued to decline as the general sentiment towards ICOs began to change.

The bear market has also started to affect ICOs and the latest figure for August shows that the industry has hit a low.

Ethereum’s could be impacting ICOs

In August, ICOs pulled in just $195 million. Some attribute the latest figures to the drop in Ethereum price. A huge percentage of ICOs conduct their token sales on the Ethereum network and make use of ETH token.

At the time of writing, ETH was trading at $293, down by almost 90% from its all-time high attained early this year. Ethereum has however struggled to reach the $300 mark over the past few weeks.

Ethereum’s struggles continue as its community faces trouble deciding on an upcoming protocol that would impact the economics of mining Ether (ETH).

Further, a recent report published by ICO advisory group Satis predicts that Ethereum (ETH) will only double in value in the long-term. In terms of Bitcoin, assuming the long-term target is achieved, Ethereum would trade 90% in the red versus Bitcoin at 0.00408617 bitcoins.

ICO Funding Model Feels Out of Date as Funding Continues to SlowOver half of ICOs die within four months of token sale

Another drop in capitals raised from ICOs can be attributed to the general sentiments becoming more negative due to the overwhelming amount of projects, lack of regulations and fraud.

A recent research conducted by Boston College Carroll School of Management reveals that 56% of ICOs fail within four months. The study found that the majority of projects were considered dead within four months of issuing their token to buyers.

The failed ICOs cause a significant drop in value for investors who hold their coins longer than 60 days.

Overall, the study added that the ROI for ICO investing is in steady decline and becoming a much more risky prospect relative to the volatility of the traditional crypto market.

Investors don’t hold on to ICO tokens out of a belief in the technology or anticipation of further price appreciation. They benefit the most from selling their coins within the first several weeks of trading, with ROI severely declining past the two-month mark.

More investors becoming aware of ICO scams and the skepticism that development teams being able to deliver. With the cryptocurrency market embarking on a steady recovery, it is left to be seen if ICOs can do the same.

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