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Initial Coin Offerings or ICOs were all the rage last year. However, with a downturn in the cryptocurrency market and a growing number of coin projects dying, it might be worth asking if the concept of issuing tokens with an ICO has come to an end. Here’s a closer look at the state of the ICO market and its potential uses for startups, blockchain PR firms, and enterprises.
According to the Boston College Carroll School of Management, more than half of all ICOs fail within just four months. The college studied over 4,000 ICOs and found that investors who held on for longer than 60 days could expect significant losses. This mania was fueled by the rise of cryptocurrency prices throughout 2017. As Bitcoin’s price hit $19k, more companies launched ICOs than ever before.
Throughout last year, 913 projects were launched with 435 (48%) a success, raising a little over $5.6 billion. When the price of Bitcoin and altcoins declined this year, industry insiders expected a similar downturn in the market for ICOs. Instead, the market seems to be booming this year.
In just the first half of 2018, ICOs have helped startups and entrepreneurs raise more money than the whole of last year. In fact, 521 projects (57% of last years total amount) were launched in March alone. So far, these projects have raised over $7 billion in funding. The top three countries for ICOs are Russia, the US, and the UK. Startups based on the Ethereum blockchain and focused on the finance sector seem to be the most popular projects so far.
Regulations could change the game
The lack of clear regulations and clarity in the market seem to make it fertile grounds for fraudsters. According to a report by the Statis group, nearly 80% of all the ICOs launched last year were fraudulent – which means investors lost well over $2 billion in 2017.
Better regulations and widespread investor education could help stem the problem and make ICOs a legitimate form of fundraising. So far, most countries around the world allow ICOs either with light or no regulations. Only Mexico and Australia seem to have both a free market for ICOs and a clear framework of rules to govern activities. France could soon join the list with plans to create “bespoke” cryptocurrency and ICO regulations by 2019.
Regulated ICOs may reduce the number of projects and the amount of money raised through ICOs initially, but with better protection and a legitimate framework, institutions, corporations, and retail investors could be more likely to participate. ICOs are far from dead and the roadmap ahead looks as encouraging as ever.
Erhan continues to lead from the front, inspiring his peers, guest lecturing at the University of Huddersfield Business School and mentoring business students. Erhan has landed coverage in print and broadcast outlets around the world, including Entrepreneur Magazine, International Business Times, Inc Magazine and Buzzfeed.