This year, the ICO (initial coin offering) market has practically died after last year’s boom amid actions by global regulators to limit activity in this area, as well as a “bearish” trend in the cryptocurrency market, writes The Wall Street Journal.
According to TokenData, the amount of funds raised by startups through ICOs in the first quarter of 2019 was only $118 million, compared to $6,9 billion in the same period a year earlier.
The sharp drop in ICO volumes suggests that the cryptocurrency boom of recent years has gone too far, and potential investors have moved from enthusiasm to skepticism in their attitude towards the market, experts say.
ICOs have become an important tool for the cryptocurrency market as they allow startups to raise resources by bypassing traditional funding sources. However, the lack of any regulation in this sector has created many problems for it.
“Token sales as they were in 2017 and 2018 are essentially dead”, says TokenData founder Ricky Tan.
The Securities and Exchange Commission (SEC) has taken a fairly tough stance on ICOs, blocking a series of offerings. Officially, the SEC believes that any cryptocurrency created as a result of an ICO should be treated as a security and, accordingly, subject to existing disclosure requirements and investor protection laws.
Exchange operator CBOE Global Markets Inc. announced earlier this month that it would exit trading in Bitcoin futures, which launched in December 2017 – at the peak of the cryptocurrency market.
CBOE said it does not intend to add new Bitcoin contracts. Thus, futures trading will cease in June – upon the expiration of currently traded contracts.
At the time the exchange launched Bitcoin futures, the price of the cryptocurrency was about $17 thousand. On Monday, Bitcoin was trading at $4,135 thousand.
Of the 2,500 token offering projects tracked by TokenData, 55% failed to even raise funds. Among those projects that have successfully completed an ICO, only in 15% of cases the cost of tokens currently exceeds the price of their placement.