ICO’s or initial coin offerings have always been infamous for the high risks associated with their success. Many ICO’s fail despite raising a good amount. According to a survey by Tokendata, in 2017, about 46% of ICO’s did not reach fruition stage despite raising about $104 million. Many ICO’s are categorized as semi-failed as there aren’t any updates related to them either on their website or on social media channels.
Factors attributing to death of ICO’s are multiple, increased risk of investing in cryptocurrency, stringent regulations in making, tough competition and diminishing returns are some of them.
The volatile nature of cryptocurrency is also one of the biggest reason for ICO fail. Especially in Q1 the staggering losses of cryptocurrencies like Bitcoin has made VC’s hesitant to invest in crypto.
Promotion of crypto on Facebook and Google is difficult. Since January 2018, Facebook stopped the promotion of crypto-related advertisements and soon Google followed its lead. Twitter also selectively banned few crypto accounts which were suspected to be scams. These bans are a limiting factor in the growth of the crypto community. Even MailChimp is planning to stop mass email campaigns related to cryptocurrencies and ICO’s.
China banned ICO’s last year and the Russian government has laid down a new set of rules for ICO’s with the guarantee that investors can sell back their tokens.
Despite a hostile growth environment, ICO’s and crypto have shown resilience. Though, it may have to resort to other sources for publicity and fundraising. ICO’s are going the extra mile to prove their credibility. Initiatives like SAFT and inclusion of legal disclaimers in whitepapers prove that ICO’s believe in the transparency that they boast of. It would be interesting to see ICO’s deal with the stringent regulations and limited sources of publicity. Blockchain is here to stay but ICO’s have to go a long way before they make an indelible mark in the financial ecosystem.
This is a guest post/opinion piece and should not be construed as financial advice.