The Broad View
More than 1,000 cryptocurrencies have died. That is not hyperbole — it is the cold arithmetic of a market in full correction mode. As of late June 2018, Dead Coins catalogs approximately 800 defunct tokens, while Coinopsy estimates the number exceeds 1,000. The vast majority of these projects launched during the ICO boom of 2017, raised money on the strength of white papers studded with promises, and collapsed when the speculative tide receded.
The numbers tell a devastating story. Aaron Brown, a business author and investor who writes for Bloomberg Prophets, estimates that 80% of all ICOs were outright frauds. Another 10% lacked substance and failed shortly after raising money. That leaves approximately 10% of ICOs with any legitimate foundation — and even among those, most will probably fail, according to Brown. The implication is stark: of the thousands of token sales that collectively raised billions of dollars, only a tiny fraction will produce anything of lasting value.
The scale of the ICO boom is staggering. According to CoinSchedule, token sales raised $11.75 billion in 2018 alone — and this figure was recorded in June, meaning the year was only half over. Satis Group, an ICO advisory firm, analyzed the market in March 2018 and found that fewer than 4% of ICOs raising between $50 million and $100 million could be classified as successful or promising. The remaining 96% ranged from questionable to outright failures.
Key Support and Resistance
The broader market context amplifies the ICO carnage. Bitcoin, the industry’s bellwether, is down 57% year-to-date as of June 28, trading at approximately $5,903 according to CoinMarketCap data. Approximately 80% of the 1,586 cryptocurrencies tracked by surveyor Finder.com declined during the week ending June 25, with an average loss of 19%. There are few places to hide in a market this correlated on the downside.
Ethereum’s decline to $422 is particularly significant for the ICO ecosystem, because the vast majority of token sales were conducted on the Ethereum blockchain using ERC-20 tokens. As ETH has fallen from its January highs above $1,400, projects that raised funds in ETH have seen their treasury values evaporate. A project that raised $10 million worth of ETH in January might now hold less than $3 million in equivalent value — assuming they did not sell immediately, which many did not.
Bitcoin’s dominance has stabilized around 42%, a recovery from lows near 38% earlier in 2018. This rotation back toward Bitcoin during the downturn reflects a flight to quality within the crypto market — investors are prioritizing liquidity and established track records over speculative upside. The altcoins that fueled the ICO boom are bearing the brunt of the selling pressure.
Institutional Flows
The institutional appetite for blockchain technology remains, even as enthusiasm for ICO-funded tokens has evaporated. CB Insights data reveals a sharp divergence between blockchain startups and traditional tech companies in terms of follow-on funding. Of 103 blockchain companies that received initial seed or angel funding in 2013 and 2014, only 28% managed to raise additional capital. By comparison, 46% of the 1,098 traditional tech companies that raised seed rounds in the United States between 2008 and 2010 went on to secure second-round financing.
The gap widens further in later stages. Among traditional tech companies, 14% progressed to a fourth funding round. For blockchain startups, that figure drops to just 2%. The data suggests that while blockchain as a concept attracted initial curiosity and capital, the ability of these companies to demonstrate sustainable business models has been severely lacking.
Arieh Levi, an analyst at CB Insights, captured the fundamental challenge: “I don’t think we found the killer app yet. It just seems like there’s been a lot of projects tried, but there aren’t really many users of blockchain protocols beyond speculators and traders.” This observation cuts to the heart of the ICO problem — most token projects were built to serve a speculative ecosystem rather than solve real-world problems.
The most spectacular failure remains BitConnect, whose market capitalization collapsed from nearly $3 billion in December 2017 to approximately $4 million by June 2018. But BitConnect was merely the most visible casualty. Lex Sokolin, global director of fintech strategy at Autonomous Research, estimates that investors may have lost as much as $500 million across all failed ICO projects — a figure that likely understates the true damage when accounting for opportunity costs and the decline in value of tokens that still technically exist but are effectively worthless.
Sentiment Indicators
The death toll is rising fast. Richler Vanierwitz of Coinopsy predicts the trend will accelerate: “We will see a lot more abandoned ICO that never make it to an exchange. ICO investment will become very unprofitable.” The naming conventions of some defunct tokens — CryptoMeth, Droplex, Roulettecoin — suggest that many of these projects were doomed from the start, launched by opportunists seeking to capitalize on a market frenzy rather than builders with genuine technical ambitions.
Yet there is a curious silver lining emerging from the wreckage. A new category of crypto business has appeared: the token undertaker. Startup CoinJanitor has partnered with Dead Coins to help investors and developers recycle failed projects with market caps below $50,000. CoinJanitor CEO Marc Kenigsberg explained the concept: “We take as many coins off the market as possible. Every time we absorb a project, we have more audience and more marketing reach. All the tokens we get we destroy, we actually burn them. Turn off the entire blockchain.”
Lucas Nuzzi, director of technology research at Digital Asset Research, noted that this phenomenon is not entirely new: “Last year, there were many instances where a project that was essentially ‘dead’ was picked up by a developer, who might have been passively mining it, and brought back to life. Out of nowhere, a new version would then come out and the price appreciated, regardless of the substance of the changes made by the developer.” The line between dead and dormant in crypto remains surprisingly porous.
The Bull/Bear Case
The bear case is that the ICO cleanup has only just begun. With more than 1,000 coins already dead and 80% of remaining ICOs likely fraudulent or nonviable, the market faces a long tail of failures that could continue to suppress sentiment for months. The regulatory environment is tightening globally, with authorities in the United States, China, South Korea, and Europe all cracking down on unregistered securities offerings disguised as token sales. This regulatory pressure could accelerate the death of marginal projects while deterring new ICOs from launching.
The bull case is that creative destruction is exactly what the crypto market needs. The 2017 ICO boom attracted immense amounts of capital, but much of it was misallocated to projects without viable business models or experienced teams. The purge of failed tokens concentrates remaining capital and talent into stronger projects. The blockchain startups that survive this culling — the ones that can demonstrate real users, real revenue, or real technical innovation — will emerge into a less crowded and more discerning market.
The parallel with earlier tech cycles is instructive. The dot-com crash of 2000-2001 wiped out thousands of internet startups, but the companies that survived — Amazon, Google, eBay — went on to define the next two decades of technology. The crypto market may be experiencing a similar cleansing process, painful in the short term but ultimately healthy for the ecosystem’s long-term development.
For now, the numbers are stark and the sentiment is grim. But as the ICO graveyard fills, the foundations of a more mature cryptocurrency market may quietly be taking shape.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Cryptocurrency investments carry significant risk, and readers should conduct thorough research before making any investment decisions.
80% of ICOs were outright frauds per Bloomberg. and the remaining 20% mostly failed anyway. the 2017-2018 cleanup was brutal
DeadCoins should be mandatory reading. if your token has no revenue, no users, and no plan beyond exchange listing, you are the next entry
if your token has no revenue, no users and no plan beyond listing it is already in the DeadCoins queue. just waiting for the block confirmation
$11.75 billion raised via ICOs in just the first half of 2018. most of that money just evaporated
$11.75B in the first half of 2018 alone and most of that went to projects with nothing but a whitepaper and a telegram group
DeadCoins and Coinopsy should have been required reading before anyone aped into an ICO
80% fraud, 10% no substance, 10% maybe legit. Brown was generous. i would put the legit number closer to 3%
3% legit sounds about right. and even those 3% are fighting for survival against well funded competitors. ICO era was pure casino