The Initial Coin Offering (ICO) market is currently experiencing a sharp decline according to August statistics. The industry, which peaked during the months of January, February, and March is believed to be moving down in lockstep with the current floundering cryptocurrency market.
Cryptocurrencies have been bleeding value since the beginning of the year, triggering an industry-wide domino effect that has caused significant concern among skittish investors, who are jumping ship. For cryptocurrency startups undertaking ICOs, August was by far the worst month this year, with only about $326 million being raised. This is a sharp drop as compared to January whose figures stood at just over $3 billion.
ICO Failure Statistics
According to a recent study undertaken by GreySpark Partners, close to 50 percent of all ICOs launched in 2017 and 2018 failed to raise enough funds for the projects to take off, with only 40 percent of them raising over $1 million.
Analysts have pointed to several factors that have contributed to the decline in the ICO space. They include increased investor awareness, who are now, especially wary about ICOs, tighter government controls, poor marketing strategies, and market saturation.
An Evolving Market
Another major reason why ICOs are on the decline is that more companies are choosing to fund their cryptocurrency projects through other alternative means to conform to government regulations. Security Token Offerings (STO), for example, are becoming more popular because they are more compliant with guidelines issued by government agencies such as the SEC.
They are also seen as a way to legitimately seek funding for digital asset initiatives, and companies such as Overstock have jumped on the STO bandwagon for this reason. For investors, STOs are a safer way to get involved in crypto projects than ICOs, because they are backed by real company assets.
Simple agreements for future tokens (SAFT) are another way through which cryptocurrency companies are raising funds. Kodak, for example, has adopted this mode for its Kodakone project. SAFTs are used to raise funds from accredited investors with the promise that they will get access to the finished product.