The market for initial coin offerings (ICOs) appears to have significantly cooled in April, with total proceeds falling to their lowest level in eight months.
If industry statistics are to be taken literally, the month of April witnessed an abrupt slowdown in ICO funding. Token raises generated more than $543 million over the past 30 days, compared with $974.6 million in March, according to ICOdata.io. That represents a decline of 44% from March and 62% from January levels.
As the following chart illustrates, cumulative funding for ICOs has declined steadily since the beginning of the year.
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A total of 659 projects have raised nearly $4.2 billion in funding this year, bringing the average funding amount to $6.3 million. By comparison, 871 projects raised nearly $6.1 billion all of last year for an average funding total of $7 million.
Is ICO Hype Dying Down?
With the data presented above in mind, it’s easy to conclude that ICOs are losing their hype. After all, a huge portion of the 2018 crowdfunding total belongs to Telegram, which as of two months ago, had raised $850 million out of an expected $2.1 billion haul.
Those with a skeptical eye on ICOs also point to the fact that nearly 50% of all token projects have failed either before funding or after fundraising was complete. When “semi-failed” projects are included, the failure rate surges to 59%.
Legislation, particularly in the United States, is one of the biggest hurdles facing ICOs. The head of the Commodity Futures Trading Commission (CFTC) told Congress in February that every ICO was considered a security. He reiterated that claim last week before the U.S. House of Representatives Committee on Appropriations, where he said there wasn’t a single ICO that didn’t meet the citeria for a security.
For all the gloom and doom surrounding ICOs, the next generation of token raises is already upon us. A project like tZero is leading the new paradigm of tokenized securities, which requires full certification by the U.S. Securities and Exchange Commission. Additionally, blockchain proponents argue that the Jumpstart Our Business Startup Act, which was signed into law by President Obama in 2012, makes it easier for companies to sell securities using the crowdfunding model.
Efforts are also underway to develop a more robust ICO platform that protects investors as well as the integrity of the project. Last month, The Abyss became the first project to pilot Vitalik Buterin’s “DAICO” concept, which utilizes smart contracts to encode specific rules at the beginning of a crowdfunding campaign.
Buterin, who founded Ethereum, believes that a DAICO model could improve ICOs by reducing both risk and complexity, while at the same time promoting greater transparency.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock.