How the Crypto Bear Market Is Affecting ICOs
2017 was a mind boggling year for crypto prices. No one could have predicted that Bitcoin would surpass $20,000, or that EOS would start an ICO that would raise $4 Billion. By year’s end, more than $4,000,000,000 had been raised in hundreds of ICOs. And in 2018, that total was quickly surpassed.
By March 2018, more than $7,300,000,000 had already been invested in ICOs. This near doubling of 2017’s ICO totals was astounding, even to the most optimistic investors. The market took in another $2 Billion in May and a remarkable $5.7 Billion in June. It seemed to many that the sky was the only limit.
But then growth slowed. July saw only $800 Million invested in new ICOs. August saw another precipitous decline to $450 Million. Many investors feel puzzled. Is this the end of the ICO as a fundraising model? Or is this situation merely temporary?
While we can’t answer this question authoritatively, there are different ways to look at the question. We’ll consider two distinct possibilities.
The ICO market may simply be oversaturated. There are more than 2,000 active cryptocurrency projects at this time, competing for dominance in considerably fewer industry niches. It may be that there are fewer ICOs with novel ideas entering the space, or that investors are recognizing that the golden age of ICO innovation is a few months past.
What we think to be more likely is that the ongoing cryptocurrency bear market is taking its toll on the ICO market. Investors can be expected to be wary of putting money into a novel venture, when crypto assets are declining in value across the board.
It’s likely that as the cryptocurrency markets rise in value once more, that ICO investment will follow. We can see this in the Bitcoin Dominance rate of 2018. Bitcoin represented only 33% of total crypto market cap in January, but today represents more than 53% of total industry value. By all appearances, cautious investors see Bitcoin as the safest crypto asset, and ICOs are the most speculative.
If and when the bulls return to the altcoin market, expect ICOs to see a concurrent bump. We don’t think we’ve seen the end of the ICO craze. Think of the late summer as a time to catch our collective breaths.