70% 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.  While we’ve been touting the great news coming out in the cryptocurrency markets the last couple of weeks, this is one piece of news that should be sobering and serve as a wake-up call to all investors in this space – invest in quality coins!   Follow our news and blog posts here.

Small-Cap ICOs are losing value

According to the report compiled by research firm Diar, 562 ICO tokens ranked outside of the 100 larest cryptocurrency marketcaps have collectively lost $5 billion dollars in nominal value against what they were offered for at ICO prices.  Remember – ICO prices were advertised as a stunning value for what these coins would eventually be worth.

Even more stunning news – that massive deficit doesn’t even include the value of the tokens reserved for the development team or otherwise wasn’t made available through the ICO, which in some cases, would make the post-ICO performance be even more abysmal.  

Equally notable is that 324 tokens that collectively raised $2.3 billion dollars have still yet to convince anyone of the hundreds of cryptocurrency exchanges to list them on their platforms, such as Kucoin, Binance, Bittrex, etc etc.  Another 44 tokens that raised a combined $1 billion have been listed on at least one exchange but have virtually no trading volume, including Bankera, which raised $150 million.

According to Diar, the worst-performing ICO token belongs to Sirin Labs (SRN), a startup developing a “blockchain phone” called “Finney”.  Since raising $158 million through its ICO, SRN has shed nearly $141 million, an astonishing 89% in just 9 months.

Part of SRN’s poor performance may be due to stiff competition in the blockchain phone market.  Competition is something that Kurt and Matt talked about in our latest CryptoTraders Pro podcast, you can listen to that here.  As CCN reported, HTC, a major smartphone manufacturer, also plans to release a blockchain phone, christened the HTC Exodus.  

Close behind Sirin Labs is PumaPay, which raised $117 million but is now only worth $15 million.  Envion and Paragon each raised close to $100 million, but are now worth $4 million and $3 million respectively.

ICOs have raised nearly $20 billion in 2018

But this isn’t scaring investors, even if everyday traders are slowly becoming disinterested in cryptocurrency due to this months-long bear market.  According to CoinSchedule, which has recorded data from 789 token sales held in 2018, blockchain startups have collectively raised more than an astonishing $20 billion dollars.  

These figures may be somewhat generous, since CoinSchedule takes Venezuela’s claims that the state-backed petro cryptocurrency raised $735 million at face value, but the astonishing part of CoinSchedule’s report is that not even a bear market and increased regulatory enforcement can quench the voracious appetite that investors have in this fundraising model.  If CoinSchedule’s data is even somewhat accurate, ICOs have raised more than $1 billion dollars every month except for August and July.

Even as ICOs have collectively raised an impressive sum in 2018, this isn’t to discount the fact that individual projects have often struggled to meet their fundraising targets.  CoinSchedule’s report indicated that 51% of projects raised less than half of their goal.

Investors hungry for a Home Run

What is the explanation for the enduring popularity of ICOs?  It’s probably due the risk/reward mentality of investors in this space.  They’re willing to place a few bad bets on a variety of tokens in the hope that they will run the table and more than make up their losses on one or two projects.

This seems to be the case – just look at EOS, whose $4 billion dollar crowdsale started in 2017.   Not only has it broken the top 100 largest cryptocurrencies by marketcap, it’s cracked the top 15, and have given its earliest investors massive returns on investment (ROI).  Cardano, IOTA, and NEO (antshares) collectively raised $137.3 million dollars. Even after shedding nearly 80% or more from their all time highs, these tokens have a combined valuation of nearly $6.4 billion dollars, representing a ROI of more than 4,500%.  Well worth it, no?

Final Thoughts?

What do you think?  What are some bags you’re holding that are under ICO price?  Let us know on Facebook!  Is this article getting you down and fearful for the future?  Don’t. The US Congress is going to be debating and voting on 3 pro-cryptocurrency bills, Binance is starting to offer crypto/fiat pairs, and investment firms are starting to roll out crypto products later this year into next.  Cryptocurrency and blockchain technology isn’t going anywhere. Still not convinced?  Check us out on Facebook and let us convince you otherwise.