Investing in the next Bitcoin is everybody’s dream. Finding an altcoin that is cheap and which will increase its price thousands of times does sound good and that is exactly what many ICOs out there promise or hope to gain. But should you really invest in an ICO? Stats say that you shouldn’t.
An ICO (or initial coin offering) is, to put it very simple, a method for investors to buy tokens from an upcoming crpytocurrency before it gets listed on exchanges and usually before it actually is functional. This is a way to give the company handling the upcoming coin enough money to build the said crpytocurrency. The idea behind this is that investors hope to buy cheap and sell for extreme profits.
But does this actually work? Not really!
A recent report created by Bitcoin.com shows that almost half of all the ICOs launched in 2017 have already failed. 46% of all the last year’s initial coin offerings are dead already after raising an impressive cumulative $104 million.
Out of the 902 ICOs listed on ICO tracker Token Data, 142 failed from the beginning (at the funding stage), while 276 other ICOs have failed after raising the funds, either by running away with the money or by fading into obscurity. This means that 46% of the ICOs started in 2017 have failed.
However, there’s even more bad news: 113 more ICOs are almost dead since the official websites of the coins no longer exist or are ignored, the teams behind them are no longer active or the actual communities behind these coins are so small that the chances of them breaking through are minimal.
In other words, at least 59% or 531 of the ICOs of 2017 are confirmed dead or just about to die.
And this is pretty scary if you look at it from a buyer’s point of view. Especially if we’re talking about an inexperienced buyer who just wants to get their hands on some tokens and see them increase their value by a hundred times, making them rich in the process. Chances are that this is never going to happen.
Now, everybody says that investing in cryptos right now is an extremely risky business since the market is highly volatile, but initial coin offerings take things even further and make everything a lot riskier.
My advice? Stay away from investing in ICOs unless you really know what you’re doing and you have complete faith in the company or project you’re investing in. Statistics show that chances are that ICOs will fail and will make nobody rich (except for, maybe, their own creators).
How many ICOs made their investors rich?
Of course, this is an over-statement, as we don’t really know who got rich after investing in these ICOs. But we can look at the data from last year and see what tokens have grown a lot since their ICO stage. And, surprising or not, we have very few coins that actually made it big:
1. Spectrecoin (1463.60x increase compared to the ICO price)
2. Bitquence (110.75x increase in price compared to the ICO)
3. Qtum (94.49x increase)
4. Neblio (84.43x increase)
5. Populous (72.88x increase)
6. Dent (60.65x increase)
7. Omise GO (58.01x increase)
8. Aeternity – Phase 1 (54.03x increase)
9. Revain (47.54 increase)
10. Augmentors (45.76 increae)
All in all, there’s a total of 35 coins that have seen a 10x and above increase in their USD price (while the prices in ETH or BTC are much lower). 90 more coins have managed to double their price or more (but under 10x). However, many of these coins have launched in late 2017 and they might (and some will certainly do) slip down, keeping the numbers even lower in the long run.
So we can say that out of the 902 ICOs of 2017, 531 failed or are almost dead, while just 125 coins have at least doubled their price, with just 35 coins that can be considered real successes based on their increase in price. That is just 3.88% of last year’s ICOs.
This is absolutely normal and having 35 extremely successful ICOs giving 10-fold and above profits is still amazing and proves that there are opportunities here as well. But the risks are much higher than with already launched cryptocurrencies and for beginners, I’d consider these nothing but money pits.
So my advise would be to stay away from investing in ICOs unless you really have money to risk OR you know exactly what you’re doing. If you have a really solid understanding of the market and you’re ready to keep your funds locked for a while, you can still do good.
It’s true that if you put $100 in Spectrecoin in January 2017 when the ICO was still going, you’d now have about $12,000 in your wallets.. but spotting one insanely good coin out of hundreds is usually impossible and too much of a gamble. A risk not worth taking by most people!
Have you invested in ICOs so far? What was your experience and how much did you win or lose in the process?