As Bitcoin kept rising in 2017, people’s interest in cryptocurrency kept growing as the days passed. And like this wasn’t enough, as a several amount of speculators considered that an investment in projects through a lightly regulated process called ICO – short for initial coin offering – was an even better idea.
Basically, this process consists of a startup selling its own crypto token, in an attempt to raise money. Some of them were actually successful, but most of them were nothing but big flops.
A fail rate bigger than you imagined
According to a report from Fortune, from a total of 902 tracked ICOs, 142 failed before raising funding, while another 276 failed just after the initial fundraising was over.
After doing some quick math, this results in a 46% failure rate. But this is not everything since another 113 projects were semi-fails. Specifically, the teams behind the ICOs disappeared. With this, the fail rates goes to 59%.
Financially speaking, we’re looking at big amounts of wasted money, even though a fail rate of 59% is not that big for anybody who is familiar with startups. Nowadays, more than 75% of them, backed by traditional venture funding, fail, while 30 to 40% of them take all of the investors’ capital with them. Therefore, the ICOs’ success rate from 2017 was actually quite big.
The numbers are still disturbing
The entire mania with the ICOs started taking hold in the third quarter of the year, which means that a disproportionate number of failures were registered in just a few months. Also, it’s worth mentioning that not all of the projects that were closed are actually failures.
Some ICOs didn’t produce anything at all, while some of them didn’t even intend to, as they were exit scams, whose founders disappeared with the entire amounts of raised money. Others had a similar, but slower method, fading into obscurity.
Considering all this, if you’ve decided to put your money on this, make sure you do all the required research at first! And never invest more than you’re ready to lose.