Ernst & Young Report: 86% of ICO’s Worth Less Than Listing Price and Only 29% Have MVP
Ernst & Young provide global professional services to many different entities, and one of their recent roles was the report of the way that ICOs have performed throughout the year. Initial Coin Offerings have been through a lot this year and have lost so much of the value that they originally held.
These are the types of issues discussed in the report, which was only first published on October 19th.
The information gathered comes from 141 separate cryptocurrency projects to get a better sense of the average performance in the industry. The only requirement for these projects to qualify were that they had to issue tokens in ICOs within 2017. Based on the available data, there are 86% of the ICOs that haven’t been able to maintain the original list price of their coins, since they’ve been subjected to the bear market.
The presentation spans 13 pages, so this concept is described in depth.
The research may be slightly skewed, considering the difficulty in finding ICO data for each project, especially if they weren’t well publicized. The report said,
“ICO market is unregulated, there is no single source of ICO data, reporting standards or generally accepted methodology. The findings are preliminary and based on public sources, and EY cannot always match the information given by these sources with the transactional data available on the public blockchain. We based our study on project websites, the most popular crypto exchanges, ICO trackers, data aggregators and interviews.”
Bitcoin was the leader of the rise in tokens in 2017, even though it started at $700 in January 2017. By the end of the year, the price had risen up to $20,000, and many investors decided to jump on the cryptocurrency bandwagon. At the same time that cryptocurrency was about to rise, a market crash came quickly after by January, and the constant struggle of the bear market tore the token back down to rest at $6,000.
According to the research provided, it seems that the developers in the community that are thriving the most are actually those from Ethereum.
Most of the success from the ICO projects can be credited to the high point of the crypto hype, so it should come as no surprise that the bear market was responsible for tearing that down as well. The report indicated that about 71% of the ICOs that saw success at the time don’t even have a working product right now. Still, consumers should take note that the majority of these projects were involved in blockchain technology, which could be indicative of more foundational groundwork that is in progress within the market.
Paul Brody, representing Ernst & Young as the global innovation leader for blockchain technology, engaged in an interview where he said that the outcome of the ICO market appears “worse than we thought.” Along with their lack of predictable future, there’s plenty of former ICO projects that have even lost value of their own tokens on purpose, due to their newfound acceptance of fiat currency.
Much of the reason is due to the fact that the coins are basically rendered useless by accepting any type of fiat currency in its place.
The ICO market is having a significantly worst time than the dot.com market did, though the pattern was similar in the 1990s with multiple useless startups. One example Brody uses was Pets.com, which was a pet supply company for online orders. The buying frenzy brought quick success, but the bubble didn’t last. Brody commented,
“At least from Pets.com you could get pets food. They had an actual working business, they had a product.”
Among their well-researched data, the report can be summarized with an important point that they made about functionality by this point in each project’s endeavors –
“Typically, within one year of a traditional venture-backed software start-up, you would expect to see a significantly higher percentage of the companies with a functional early stage product.”