ICO investors may have started the year with high hopes, but a recent report from EY shows that portfolio values have tumbled during the first half of the year. During this time, the value of portfolios investing in initial coin offerings went down by 66 percent. Interestingly, ICOs have raised more than $21 billion from investors year to date, with over $5 billion collected in June alone. This staggering loss of value could suggest deeper problems in the ICO market.
Scary Statistics Begin to Show
In a new study titled “Initial Coin Offerings: The Class of 2017 – One Year Later,” EY study suggests that the value of a portfolio holding these coins has fallen by 66 percent since the peak of the market between December 2017 and January 2018. During the first half of 2018, 86 percent of the leading ICOs that got listed on cryptocurrency exchanges in 2017 were selling for prices lower than their initial listing price. The study further shows that 30 percent of all coins have lost all their value.
Meanwhile, a few coins experienced growth. However, 99 percent of the growth was witnessed in the top 10 2017 ICO tokens only, which are mostly within the blockchain infrastructure category.
The initial analysis of these coins was completed in December 2017, and EY looked into ICOs that represented 87 percent of the ICO funding last year. The study goes on to suggest that the lack of fundamental valuation in ICO projects and the subsequent lack of due diligence from investors have led to such extreme volatility in the ICO market.
Most ICOs Have Nothing to Offer
EY goes on to suggest that only 29 percent of ICOs from 2017 have progressed to prototypes or working products, which marks a mere 13-percent increase from December 2017 initial analysis. The remaining 71 percent of the ICOs have no offerings in the market.
EY Global Innovation Leader Paul Brody commented on the state of the ICO market, saying that there is lack of understanding among investors who do not compare the risks and rewards of these investments. ICO project developers and investors have different timelines for ROI as well.
Brody went on to say:
“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.”