October ICO Funding Plunges amid Persistent Market Blues
ICO fundraising in October reached less than a third of the levels in September, with almost no activity in the first half of the month.
Either the initial coin offering (ICO) model is dying or startups are delaying projects for better times. As the bear market stretches into its eleventh month, the ICO funding trend shows an even steeper decline, with only about $54.6 million in total raised in October, according to Icodata.io.
The monthly proceeds have been dwindling throughout the year after the equivalent of more than $1.5 billion was raised in January. The October amount is less than a third of what ICOs generated in September.
However, the exact size of the funds and the distribution between assets is unknown. Most of the capital obtained through ICOs has been raised in Ethereum (ETH), meaning a potentially higher valuation at peak prices. However, as some projects attempted to sell their ETH, the price tanked, currently hovering around $200.
The tidal wave of change expected to hit soon is in the form of security token offerings (STOs). The requirement to register a security or provide proof of asset ownership would be key to launching new tokens. This new approach would also help combat fraud, which has been rampant in ICO projects.
The unprecedented enthusiasm for crowdsales allowed fraudulent projects to slip through the cracks and amass significant wealth in Bitcoin or Ethereum. Some, like Centra, went for a dramatic exit scam. Others simply drifted along, unable to build a product. Still others refunded backers after failing to meet their funding targets.
The fallout from the ICO and token sale model affected not only Ethereum but also a handful of other projects which relied on a continued opportunity to sell tokens. Unfortunately, very few ICOs chose alternative platforms like Stellar, and so far, NEO has mostly depended on airdrops instead of token sales. The EOS platform also distributes the tokens for free as there would be no demand to exchange valuable assets for still unproven ones. Platforms like Tezos, QTUM, and NEM would also see their model undermined by the lack of ICO projects.
At the same time, new platforms and exchanges are rising to handle the potential increase in STOs. However, there are still not enough STO-funded projects, and the hype may prove to be unfounded. So far, no startup has issued tokens that give the same rights as company stock.