Almost Half of All Crypto ICOs Failed - Here's How You Can Avoid the Losers - Profit Hunter by Equitymaster
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Almost Half of All Crypto ICOs Failed - Here's How You Can Avoid the Losers

Feb 28, 2018

Editor's note: Today, we are publishing an insightful essay by Prasheel Vartak, the cryptowallah who's clued into all the goings on in the world of cryptos. Below, he talks about separating the winners from the losers in the big crypto jungle out there.

Run one google search with the word 'bitcoin' or 'cryptocurrencies' and you will be flooded with ads for the 'bitcoin competitor', 'next bitcoin' and other such new coin offerings.

Even if you are a crypto-ignorer, these screaming ICOs (Initial Coin Offerings) are hard to avoid.

In fact, I had barely just started writing about cryptos and blockchain, when I began receiving emails from China and other parts of the world, pitching their ICOs - and asking me to promote them!

Anyone who has published anything about cryptos will tell you the same.

There are over 1,500 cryptocurrencies on earth today - with new ones being added every day, through ICOs.

ICOs, or Initial Coin Offerings are basically the IPOs of the stock markets.

Any startup with a functional token or an idea that works on the blockchain can raise funds by issuing a percentage of their cryptocurrency to backers. The funds are either raised in fiat money, like US Dollars, or in Bitcoins.

But what sets them apart from IPOs and traditional means of funding is that they are completely unregulated. That means, no Red Herring Prospectus (RHP), no pitches to venture capitalists, just a white paper which outlines the path and objectives of raising funds and the technicalities of the idea.

There have, of course, been some successful ICO projects - a prime example being Ethereum, which raised US$ 18 million in bitcoin in 2014, and is now a successful platform with a market capitalization north of US$ 86 billion.

However, not all projects will have the same success as Ethereum. Most investors are putting money in new ICOs only to chase prices. They don't look at whether the ICO token is solving any real problem, or if its team has the expertise to deliver on its promises.

And unscrupulous individuals and organizations have taken full advantage of this fact.

Boulevard of Broken Dreams and Promises

The unregulated nature of ICOs opens the door for malicious activity, and many ICO whitepapers are nothing but fluff and promotional material.

So, it wasn't surprising when I came across a study by bitcoin.com that showed that over 46% of all the 2017 ICOs have already failed!

That's right. Almost half of all the new coin offerings in 2017 are completely dead.

Of over 900 ICOs in 2017 alone, 142 failed at the funding stage itself, and over 275 of them either took the money and made a run for it, or just disappeared completely.

But wait, there's more! Another 113 ICOs are classified as 'semi-failed', that is, the team has stopped communicating, or there is no chance the project will take off due to the small size of its community.

All of this means that over 59% of last year's ICOs have either failed, or are failures in making.

Most of these ICOs were just trying to cash in on the skyrocketing prices of cryptos, or were just thinly veiled fronts for scammers.

The kicker here is that naive investors who put money into these ICOs lost over US$ 230 million among them.

That's a lot of lost money.

If investors had put in a bit more time and effort trying to learn more about the people bringing in the ICO, they would have easily seen through the fraudulent nature of these ICOs.

Many of the doomed ICOs were dead from the start. Most of them lacked any solid product or idea, or even a team to execute an idea, and relied solely on creating a hype and cashing out.

Despite this, ICOs are showing no signs of slowing down. New ICOs are listing every day, and most of them are bound to end up as failures.

I have been warning my readers about this eventuality for a while now. While some new ICOs and cryptos might have immense potential...

...I believe over 95% of them will be duds in the long run.

If you take one message away from my letter today let it be this same old message that every investor, everywhere, knows: Know what you are buying. Keep yourself informed. Be aware.

Warm regards,
Prasheel Vartak
Prasheel Vartak,
Editor, Crypto Confidential

PS: This new Profit Hunter newsletter comes with a new offer. Click here to see how you can get a free year of Richa's signature smallcap recommendation service. And a happy anniversary to the Hidden Treasure team.

PPS: In his monthly newsletter Crypto Confidential, Prasheel, along with his crypto guru Tama Churchouse, will be sure to keep you updated about which cryptos to keep an eye on, and which ones could be duds or scams.

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