It’s Getting Harder To Ride The ICO Market

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Fredrik Vold

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Fredrik Vold

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June 26, 2023 06:53 EDT

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The number of initial coin offerings (ICOs) more than doubled in Q2 this year, compared to Q1, while the success rate and profitability decreased, according to a new report from rating agency ICORating. Also, the structure of investors is changing, it added.

872 ICO projects raised USD 8,36 billion in Q2, the report said. However, after excluding the monster EOS ICO, the total raised sum drops to USD 4.16 billion. It’s 25% more than 412 projects managed to raise in Q1.

“The report highlights three key developments. First, we noticed a sharp increase in the share of institutional capital and a continued decline in the number of retail investors. Second, the impact that crypto exchanges have on the market continues to rise significantly. Lastly, we noticed that many projects preferred to raise the majority of their ICO funding in private sales rather than public sales,” analysts at ICORating concluded.

Also, they add that the “overall quality of projects has significantly worsened.”

55% of all ICOs in the second quarter failed to complete, the report said. That’s an increase in the failure rate of 5% since the previous quarter.

Further, the report stated that the average return of ICO tokens for the quarter was negative at -55%. That compares to an average of almost 50% in the first quarter.

Moreover, only 204 projects raised more than USD 100,000 (the same as in Q1) and only 61 were able to get listed on an exchange (compared to 89 in Q1).

The top three ICOs (excluding EOS) were Pumapay (USD 117 million), Flashmoni (USD 72 million), and HYCON (USD 68 million), according to the report.

The Most Profitable ICOs of Q2
These numbers show how much the token price has changed relative to the initial ICO token price. Projects are rated by their Return on Investment (ROI) measure, or what return they brought compared to an initial investment. Returns differ depending on a currency of an initial investment.

Another interesting finding in the report is that the majority of ICO projects in the quarter were based out of North America, despite the relatively strict regulations pertaining to the new fund-raising method in the US.

In a separate report on Wednesday, the blockchain-focused venture capital firm Outlier Ventures said that venture capitalists had invested USD 1.8 billion into various businesses working in the blockchain space in Q2, Business Insider reported. However, venture capital firms for the most part invest in these projects by buying shares in the companies behind the ICOs, meaning this amount comes in addition to what is raised from ICOs themselves.