The cryptocurrency bear market of 2018 has unsurprisingly affected crypto startups looking to raise funds via initial coin offerings (ICO), with two research papers noting a disappointing performance for the novel fundraising method this year.
While token issuers raised over $8 billion in 2017 and eclipsed $3 billion in the first three months of 2018, research data from Autonomous Research shows that ICOs only raised $326 million from retail investors this past August–the lowest amount in a year.
Industry observers blame the decrease on weak market sentiment for Ether (ETH), Ethereum’s native token, which is presumably facing a massive selloff as ICOs look to capture a significant selling price before reaching drastic lows.
Crypto hedge funds are shorting substantial amounts of ETH as well, with some traders questioning the existence of the protocol token itself, as previously reported by CryptoSlate.
Adding to this is Ethereum co-founder Vitalik Buterin, who acknowledged that the crypto market’s once-famed 1000x returns are a long shot–considering the general awareness about blockchain and lack of enthusiastic investors.
Crypto firms utilizing the Ethereum blockchain were once regarded for playing a significant role in the price increase of ETH but are now blamed for swiftly cashing out their holdings to cover operating expenses.
Prominent cryptocurrency developers are voicing similar concerns. Jeremy Rubin, a technical advisor to Stellar, remarked that the Ethereum platform remains robust to support dApp development; however, ETH plays a small role in the future of the world’s second largest network by market cap.
Large-scale ICO investments and “moonshot” returns typically succeed heightened price action in the BTC and ETH trading markets. Now, with the absence of market interest, ICO investments are simply a continuation of reduced investments in the broader digital asset ecosystem.
ICOs a Poor Long-Term Investment
GreySpark Partners, meanwhile, published an independent report claiming “nearly half” of all cryptocurrency startups, 890 token issuers in total, raised no funds in 2018. Over 40 percent of ICOs (790 firms), however, raised more than $1 million in a comparable period.
GreySpark further highlighted that a majority of token projects are poor investments, with few firms providing a “positive return-on-investment” over a longer timeframe.
While GreySpark did not explicitly mention investor trepidation toward ETH, the report stated the disappointing figures may be a mix of “lack of traction, disappointing product advancements, scams, difficulties in execution, no market and poor marketing or go-to-market strategy.”
Regardless of faltering cryptocurrency prices, the report noted the rise of crypto hedge funds, with a total of 146 investment houses focusing on specific digital assets and trading strategies. GreySpark further predicted crypto hedge funds will grow to 180 by the end of 2018.
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