From all the ICOs listed in 2017, 86% are trading below listing price while 30% have lost almost all value.
Heavy Losses for ICO Investors
A study conducted by EY on the ICOs that were listed in 2017 reveals that the overall portfolio is down by a massive 66% from the highs hit during January this year.
Further, 86% of the tokens are trading below their listing price while 30% have lost almost all value.
Only the top ten ICOs are in positive territory with 99% of gains concentrated in these tokens. Most of these tokens belong to the blockchain infrastructure category. Overall, ICOs have raised more than $15 billion in the first half of 2018 compared to the $4.1 billion raised during 2017.
Some Interesting Insights from the Study
The latest research follows an earlier study conducted by EY in December 2017 on the top 87% (141 projects) of ICOs. The researchers believe that the lack of due diligence and fundamental valuation was leading to extreme volatility in ICO prices.
Another interesting finding is that only 25 projects constituting 29% of all the ICOs analyzed in December have progressed to prototypes or working products. The remaining 71% are still without any product or service in the market.
Of these startling statistics, Paul Brody, EY Global Innovation Leader, Blockchain, said:
Despite the past year’s hype around ICOs, there appears to be a significant lack of understanding around the risks and rewards of these investments. In addition, there is a disparity between those who invest in ICOs and the ICO project developers regarding the anticipated timelines of ROI.
He further added:
While ICOs are an entirely new way to raise capital, those participating should understand that there are factors – such as the slow progression toward working product offerings – that can introduce greater risk in ICO investing.
Value of Utility Tokens Goes Down
The study reveals that utility tokens have diminished in their value. An examination of the 25 projects with a working product revealed that seven were accepting payments in fiat currency in addition to their native tokens for their offerings.
This means that customers can make purchases without the need to buy the coins first, leading to diminishing value as there would be no increase in the demand of the native tokens. Also, surprisingly in at least one case, the ICO firm is no longer accepting their own tokens.
Yuri Gedgafov of EY says:
So far, utility tokens aren’t creating the engaged communities anticipated to coalesce around innovative ideas. In fact, many of the most successful ICOs are mired in litigation or conflict over broken promises and unexpected changes in business strategy with little to no rights for the ICO investor.
The study further concludes that Ethereum remains the leading platform in the space while the new infrastructure projects have yet to gain any traction.
It’s clear that due diligence and awareness of risk are more important than ever. The number of ICOs showing gains since listing on one of the leading crypto exchanges is so limited that it would have required exceptional good fortune or a visionary portfolio strategy to have made any gains investing in the 2017 ICOs. At the moment, the level of reward in this market doesn’t look like it justifies the risks involved.
The insightful research affirms the fact that last year the market was mostly driven by speculation and that ICO investments are fraught with huge risks. Thus, investors need to do proper due diligence and need to be cautious with ICO investments.
Do you agree with the findings of the study? Let us know in the comments below.
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Author: Kuldeep Kaul