A recent study conducted by Bitcoin.com found that 46% of 2017s ICOs have already "completely failed". A further 13% were "partially failed", which brings the ratio of "firms managing to last a year" well under 41%, given these ICOs did not average a January 1st, 2017 run date.
ICO tokens aren't really an asset class like stocks, bonds, commodities and established cryptocurrencies - despite many speculators and investors treating them that way. They are more like a "gift card" you are purchasing to a (future, hypothetical) network - or, in other words, a store that may not ever actually open. This analogy has grave implications for how they should be treated in your portfolio.
In truth, you are granted no rights you can pursue (in court or otherwise) from holding most ICO tokens. Much ink has been spilled covering how the EOS token terms and conditions notes that you are actually guaranteed nothing at all by holding the token. Really, EOS is simply being more up-front about this than 95% of other ICOs are.
As a result, you need to be exceedingly careful with your allocations to such projects. I advise treating them more like gambles with good odds than true investments. For most tokens with no staking rewards, future profit potential depends entirely on finding someone to resell to at a higher price.
What ICOs really are are a funding mechanism for raising capital, ostensibly to be used for "development and production." This is where their similarity with assets like stocks end.
Unlike stocks, which give you some legal rights and enforces some restrictions on the operation of publicly traded entities, ICOs give you no protections and provide no restrictions upon the issuing "bodies". This makes them a dream come true for furthering fraudulent products, and indeed accounts for the very high failure rate cited above by Bitcoin.com's study.
Perhaps more importantly, ICOs are investments in hypothetical products given that they are still under development, or in some cases, still in the pre-coding concept phase. Anyone who has followed the development of computer and console software over the last 20 years knows of the term "vaporware" - products that are funded and hyped, but never actually released or finished. All ICOs innately carry this "vaporware" risk.
At first glance, this might appear to indicate a need for regulation. However, I would say this is actually the result of a functioning and relatively efficient market. I'm actually quite surprised that so many disreputable projects were rooted out in well under 1 year (on average). All bagholders involved knew the risks, so unless direct fraud or insider trading is involved, such is the risks you take when gambling.
Regulation by a benevolent and non-corrupt body could actually help protect investors in this environment...if one ever is created, I'll support its oversight.
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Sources: Google, SovereignMan.com, Bitcoin.com, Steemit
Copyright: EOS, Kontrol Magazine, Bancor, Tezos
Not really a surprise...
Bitcoin.com ... Hmmm... Aren't those guys the ones who keep trying to pump Bitcoin Cash and releasing rumours about how BCH will replace BTC ?
And they fail every time...
Why is this news surprising... this is how businesses work. Actually this figure is very good. 🤣
90% of small businesses fail in their first year. ICOs are funding small businesses (start-ups).
Of the 10% that survive, half are shut down within 5 years.
The remaining 5% usually grow to become either mid-sized institutions (2.9%), fail within 10 years (2%), or become giants (0.1%).
You are spreading reasonable figures in a context that makes them seem shocking. That's immoral.
March isn't even over yet. We're not done correcting. Most ICOs will fail.
Prices are still much higher than where they should be now. The real fun hasn't even begun yet.
And yes, most businesses and startups fail, and the numbers are even worse for Silicon Valley startups.
Hey @lexiconical , great post! GOOD
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Insightful @lexiconical. The crypto market is truly an inside look at the human condition combined with a 30,000 ft view of how the world is functioning and what current sentiment is with how happy we are.
I think the people that are most desperate take these massive ICO gambles because of the state of the world.
Nothing beats established cryptocurrencies. ICOs just ride on bulls.
Hanya orang2 beruntung yang akan mendapat kan nya. Di saat rolex berputar.
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To be hones, like 90% of ICO's are eather a scam or a ponzie scheme. If you are seeking for financial stability, do not invest in cryptocurrencies. Invest only means that you are ready to lose, easy as that.
First of do you have the link to the recent study done by Bitcoin.com?
I think that overtime we will see a higher % of ICOs and Crypto Assets that will fail, the art here is to pick the right once.
I wrote a in-dept article about EOS and my thoughts around it
https://steemit.com/eos/@rafaljakobsen/crypto-review-eos
I think EOS is one of the ICOs that have a high chance of succeeding based on the research I have done.
I also think that EOS will challenge Ethereum position, you can also read more about that in the article I linked above.
@lexiconical what is it EOS have done that you are confident that it will succeed?
This is how it feels trying to find an ICO to invest in
And the gambling continues.... Like the gift card analogy. Do wonder if EOS will be all the rage when the network launches. Sure hope ADA realizes some of its goals. Exciting times investing in this tech.
This is kinda like a word of warning i guess, only invest in game changing projects! a lot of these ICOs coming our are sketchy a best!
nice post
Some of ico"s now are scamm!
Thank you for this post. I didn't know the actual survival rates...
The idea of ICOs and really the treatment of utility tolens in general baffled me when I first got into cryptocurrency. I very much expected the market to work like a currency speculation market but, the more and more I dove in, it felt like a securities exchange, which as you pointed out doesn't match the nature of the product. You can't really treat a utility like it provides the same benefits as a stock (ownership, dividends, voting rights, etc.). But, that's what people are doing. The price of the utility token bares no correlation to the success of the company other than the speculation that the utility token has worth, there is no intrinsic value nor can there really ever be. It's a very unique phenomenon really.
It's just natural. I think in the end maybe 5% will be left of what we see now. If I invest I rather choose platforms at the moment like Steem and Eos.
Some great points made here!
Many newbies get involved and do not research coins before investing, seen so many crap coins get pumped and then many left holding bags at the top wondering where all the money went.
Please do your research and invest in coins based on road maps, team, pain it solves, coin supply etc.
Current coins way undervalued at the minute (In my opinion) include.....
QSP
AXP
TRAC
VEN
UTK
TNC
ACT
STEEM