13 May 2019
It seems that 2019 will be the year of repair for ICOs, which may stop existing at all. That is what two prominent analysts in the cryptocurrency industry seem to think.
Rebecca Ungarino tweeted a graph showing the severely diminishing figures that ICOs are bringing in this year and postulated that the figure is trending towards zero. Which in effect means that ICOs, as we know them today, will cease to exist.
As can be seen in the tweet, it is a continuation of a trend that has been ongoing since the middle of last year and shows no signs of stopping at all. Another analyst has a different explanation for this trend than the usual doom and gloom that many have postulated.
Tom Lee, a notorious cryptocurrency bull, say that crypto startup seems to be pivoting from coin and token offerings to equity offering that is more common in the larger startup world. He attributes this to maturity in the market overall. Further, he thinks this has to do with projects looking more towards value creation than the previous money grab scheme that was prevalent in the ICO space.
Providing utility to end users, while raising money via equity seems to be the new norm for crypto startups as they face the harsh truth that they are not so different from normal startups. He further went on to say that he believes that "2019 is a year of repair, setting up for a strong recovery in crypto prices broadly in 2020. Any improvements in supply/demand dynamics are positive for prices, and hence, the slowdown in ICO funding is a net positive. The sentiment is also quite muted, which is positive.”
Looking at figures that can be found and checked via Google analytics, it is easy to see the massive downturn in search terms relating to ICOs. There is some positivity around the whole situation, as the number of searches for STOs has shot up dramatically. So dramatically in fact that one could argue that they are inversely proportional to each other.
The problem is that since STOs are not a utility token, they do not represent a stake in the issuing firm. STOs are only useful when the startup has finally launched, and not a second before that – which has already made some investors leery of that particular option.
Another key factor leading to the downfall of ICOs is the lack of utility among the tokens that have been released. When compared to Bitcoin, which is finding ever more uses around the world, ICO tokens have by and large failed to make an impact. This is the result of startups that thought by simply sticking a token onto an existing business plan; they could somehow "revolutionize" their market place.
Many investors, even during the height of the ICO craze, had pointed out that these types of startups were not going to be able to compete in the segments that they wanted to, no matter how nice their tech specs looked.
One particular example is the Airbnb competitor called Bee Token. Their ICO managed to snag 15 million dollars in funding, and it is one of the companies that have been found wanting. The idea was to cut out the middle-man (Airbnb in this case) and let a decentralized platform handle the transactions between hosts and guests. The technology behind the token was solid, and the team of ex-Uber developers was on board and ready to change the world.
While it is a good idea on paper, and sure 15 million is a lot of money, but Airbnb has a market valuation of 31 billion dollars already. They have no problem raising billions to keep their business going and no one, at least at this stage, is going to pose much of a problem to them at this time.
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