13 May 2019
A report by the Wall Street Journal has gotten the crypto community talking about the general state of the ICO market in 2019. The report that was published on the 31st of March, has been making the rounds in the popular cryptocurrency press and things are looking bleak for ICOs this year.
This won't come as a surprise to anyone who has been following the trends as much as the reporter for the Wall Street Journal has though. There has been a definite downward trend in the amount of money raised through ICOs since the middle of last year. However, when put in simple terms, the difference between Q1 of last year and this year are staggering, to say the least.
The first quarter of last year had 58 times more money raised than the same quarter this year. The report also includes a reason for the downturn, which would be apparent to anyone who has been burnt due to investing in a dodgy coin or a startup that had expectations that were slightly too high.
The report by the Wall Street Journal shows that of 2500 tracked ICOs only 45% have actually managed to successfully raise the required funds. In addition to this, only 15% of the tokens issued are trading at their ICO level or higher, which puts to rest the theory that ICOs are a good investment.
Another thing that is mentioned is a quote by a blockchain attorney by the name of Joshua Ashley Klayman. Klayman says that ICOs will disappear entirely, much to the dismay of many in the cryptocurrency industry. However, he also goes on to say that the market for security tokens will not disappear and that it could inf act increase.
One of the key drivers behind the lack of ICOs is the SEC going after ICOs as securities. Though they weren't ever meant to be securities, they are being treated as such. In fact, the SEC has only classified Bitcoin and Ethereum as non-securities, giving those two tokens a measure of nimbleness to appeal to various segments in the market.
Other coins are going to be hardpressed to break free of the securities shackles that the SEC has put on them and this could hurt innovation in the field – at least in the United States. What could turn out to be a bad move, the worldwide market will become more liberalized, while the US will fall behind.
However, for those companies who are looking mainly to use STOs to fund themselves and not to produce a utility token, then they will have the SEC on their side. It will be safer for companies to release an STO, more than the ICO ever was. However, it needs to be mentioned again that this is putting companies that are based in the United States at a large disadvantage compared to others in the field where regulations are not as strict or broad.
The same problems are being found in Spain and Hong Kong. Regulators are simply not allowing ICOs to go through or are putting too much burden on them and this is forcing companies to go the STO route to simply be able to issue their tokens.
It remains to be seen if this method will allow those startups to be as agile as competitors that have no need to make their token a security. What is known is that regulators are clamping down hard on ICOs and that there will be less and less in the future.
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