The first half of 2018 show respectable figures for ICOs (initial coin offerings). Altogether, by the end of Q2 in 2018, Initial Coin Offerings have already raised $11,690,981,663 worth of investments. To put this into perspective, in the whole of 2017, a total of $5.6 billion was raised through ICO funding. This year’s figures also come out well when you consider the near $12 billion raised in the first two quarters of the year are 10 times the cumulative sum of ICO investments from the first two quarters 2017.
However, questions are being asked about whether the ICO love-in has peaked and here’s why:
The numbers
Despite the huge increase in 2018 from 2017’s figures, a closer analysis tells a different story. Some data from ICOrating.com:
- Just 7 percent of ICOs in the second quarter have been able to secure listings
- In Q2, 55 percent of all ICOs failed to meet their target funding.
- In the second quarter of 2018, 15 percent of ICO projects had an established working business already, compared to just 6 percent in the first quarter of 2018.
- 50 percent of ICOs in Q2 failed to raise over $100,000 in funding.
Judging from the numbers, we can see a possible lowering in the quality of ICO listings. The fact that just 7 percent of launched ICOs have been able to secure a listing on the ‘big’ crypto exchanges, is in an indication as to where the ICO market is at. Anyone can launch an ICO and it feels sometimes that just about everyone has. Which brings us nicely to the next point.
Scam ICOs
The mostly deregulated world of ICOs has attracted a number of scam and fraud ICOs. The last eighteen months has seen a large spike in the amount of fraud ICOs. A study by ICO advisory firm Statis Group showed that more than 80 percent of initial coin offerings held in 2017 were scam ICOs.
Just this week, famed economist Nouriel Roubini, who is known for his rather negative views on the crypto markets said nearly all ICOs are fake and that blockchain is useless. Whilst this may seem a little overdramatic and in tune with Roubini’s already on record pessimistic views regarding the crypto sphere, the number of exposed scam ICOs suggest that Roubini may well have a point after all.
Eighteen months ago, the average person in the street would have been asking the question “what are ICOs?”, but now mid-way through 2018, the same people are asking “are they a scam?”. Without doubt, whilst the explosion in popularity brought ICOs into the public realm in 2017, the rapid rise took regulators by surprise and for a while it seemed very much like the wild, wild west in ICO world. Entry into the ICO world has largely been without barriers, which has attracted the fraudsters and the scammers, cashing on the latest tech craze.
There have been some high-profile cases of ICO fraud, with owners found to have invented everything from a CEO LinkedIn profile to an actual product, with the perpetrators making away with tens, even hundreds of millions of dollars. The SEC have been successful in catching out a number of scam ICOs, and that number is growing every month, but they and other regulatory bodies have been engaged in a game of catch up with he whole crypto sphere and are still undecided on whether to classify a coin as a commodity or a currency.
The negative press has certainly affected the public trust in blockchain and crypto, made worse by the crash (or correction) in altcoins at the end of last year. The public are more hesitant when it comes to ICOs and are a bit more aware on how to spot a scam ICO.
Advertising Bans
In 2017, it was estimated that between 40-70% of all ICO marketing budgets was spent in Facebook and Google advertising, then 2018 happened. Facebook kicked it all off with a ban on all binary options and crypto ads. Anything ICO or crypto related was off the books as far as Facebook was concerned. Other social medias quickly followed suit. Twitter and LinkedIn announced ad bans and then MailChimp, the largest email services provider announced a ban on crypto. The net was tightening and ICO marketeers were forced to explore new channels or retry old channels such as PR and SEO,
Then came the biggest ban. Google banned all crypto and ICO related ads on their mega platform. With Facebook out of the picture, the Google ban was a devastating blow for ICO marketing managers.
The Current Situation
2018 has been all plain sailing in ICO world. More ICOs are failing than ever before and it is harder to market an ICO than ever before. A lot has changed in the small amount of time that ICOs have been in the public arena. It is no longer the wild, wild west of 2017, when merely by throwing money into a strong Facebook or Google campaign would mostly tip the odds of your ICO being a success into your favour.
What must be remembered is that the public conference in ICOs took a little but of a knock. First the big crash at the end of last year wiped billions off the value of the crypto world. Investors got to taste what a devastating crash felt like. It may not have stopped the popularity of ICOs, but it did make people more cautious.
Also, high profile cases of scam ICOs have weighed upon the publics perception of the ICO world. Negative reviews from the likes of Warren Buffett have added to the sense of apprehension many more people are approaching ICOs than they did last year,
The ad squeeze and heightened public awareness of scam ICOs has meant that the low quality and fraud ICOs have a mote difficult time to get listed and get their project deemed a success,
The threat of regulation hangs ominously over ICOs, but for now better quality ICOs are to be found with less risk and for the time being at least ICOs should continue break records long into next year at least.
