Long before the fast drop of Bitcoin and other crypto coins, there were rumors the ICO project had become obsolete. And these thoughts were not groundless.
It seems that the era of the ICO has come to an end. For example, on March 31, 2019, The Wall Street Journal reported that in the first quarter of 2019, the ICO collected funds 58 times less compared to the same period of 2018.
According to data provided by TokenData, ICO raised about $ 118 million in the first quarter of 2019. This figure may seem impressive until it is compared with the figures for 2018.
In the first quarter of last year, ICO raised a shocking $ 6.9 billion – a huge decline is obvious in the amount of funds raised.
From midsummer to early autumn, the ICO projects dropped by 48%. Compared to May, 2018, the decline reached 78%.
The November panic in the crypto market just strengthened the suggestions that ICO market is dying. Token holders were puzzled by the question of how to get rid of the cheaper tokens.
Honestly, the ICO situation at the end of 2018 was not optimistic at all. But it was quite easy to forecast this development.
ICO projects were undoubtedly very popular during 2017 and even in early 2018, they had attracted many investors and founders. A blockchain offer usually requires from a few months to a few years for its realization. But by the summer of 2018 it was obvious that the majority of ICO projects cannot not fulfill their obligations. It was either to the token price or the consummation of the project.
Why did ICO market fail?
There are a few reasons for the sharp ICO market decline in 2018:
Raw and unviable project ideas.
A number of ICO projects were not realized due to many factors: no real product, insufficient demand or absence of relevant market segment.
Duplication of existent offers.
ICOs start to tear up each other and compatible non-ICO projects. Many markers areas were overcrowded with similar offers. The users managed to launch hundreds of projects of crypto exchanges.
Poor quality management.
It looks like every amateur tried to launch the ICO during the past two years. The whole thing seemed to be so attractive and east – the user had to launch a site, issue a white paper, start an ad and generate profit. But they forgot the main task – to develop and promote a product. The most important thing was mistakenly ignored.
Improper use of blockchain technology
The notion “blockchain” was wrongly associated with a marketing PR instrument. But to be honest, 90% of projects did not require blockchain technology at all, and for other projects, it was simply misused. These projects were the first to fail.
ICO attracted crowds of fraudsters from all over the globe. And this immediately killed the trust in the market. Scammers started their activity and ICO quickly disappointed many investors.
All these factors lead to an inevitable downswing in the ICO market.
Is STO the next step?
ICO developed into a new type of fundraising – STO. Many experts are sure STO is a decent solution and will replace ICO.
Despite the fact that STO will not give such freedom as ICO, it has its weighty advantages that will attract those investors who are deterred by the “freedom of action” in ICO. The indisputable advantages of STO compared to traditional investments are:
– STOs are legal projects;
– Investors have real rights: to get dividends, the vote on certain questions.
– STOs have no choice but to offer a see-through model for investors, this refers to their finances and corporate framework.
But STO has two major drawbacks:
– Serious limitations allowing only some investors to participate;
– Costly and time-consuming procedure for registering the STO project.
STO is more difficult to organize than ICO, it more efforts and administrative costs are needed. But it has more transparency, more investor protection, less volatility for tokens.
But what is the next step in the cryptocurrency market? Some vote for STO, others prefer selling tokens through a cryptocurrency exchange – IEO. It is hard to make a conclusion which one fits the market need closer, but for certain, both IEO and STO seems to be a much more better alternative to ICO.