Call it the death of cryptocurrencies, or maybe just the slow leak of a crypto bubble. In the recent carnage of cryptocurrencies, where the most popular token bitcoin has shed around 70%, around 800 cryptocurrencies are now worth less than one cent, according to CNBC.
While new initial coin offerings (ICO) keep hitting the cryptocurrency marketplace, not all have been successful. In fact, a good number of them ended up as scams and many have not produced any tangible offerings in terms of the promised product or service. DeadCoins.com—a site that tracks ICO exit scams, extinct coins and near-extinct coins—has identified around 800 such coins that can be considered “dead,” defined as those whose value has tumbled below a single cent. (See also: 80% of ICOs Are Scams: Report.)
Bitcoin, the world’s most popular cryptocurrency, has lost big during recent times and its performance is being compared to the sharp fall observed in the Nasdaq 100 Index in the year 2000. Investment bank Morgan Stanley says that bitcoin's decline was 15 times faster than the dot-com bubble burst of 2000. The behavior of the other cryptocurrencies is being seen as the ripple effect all across the cryptocurrency market, similar to the one that led to the fall of a massive number of technology and internet-based companies during the dot-com era. (See also: Bitcoin Price Swings Resemble Dotcom Crash: Morgan Stanley.)
Unfavorable Developments Leading the Decline
Several recent developments are being attributed to the decline in cryptocurrency valuations.
Last month, two leading South Korean cryptocurrency exchanges were hacked, with millions of crypto tokens stolen. The hazy picture around cryptocurrency regulations and taxation issues has also kept the pressure on mass adoption of cryptocurrency dealings. Despite the increase in the number of ICOs and a significant increase in the amount of capital raised through ICOs, valuations have taken a dive across the market. CNBC cites a report by CoinSchedule that says companies secured funding of $3.8 billion via ICOs in 2017, and the number has increased to around $11.9 billion this year already. (See also: Already More ICOs in 2018 Than All of 2017: $6.3B.)
However, despite many coins going dead, optimism continues to persist even in challenging times. Proponents of cryptocurrencies believe that regulations will eventually become clearer in the future and will help in boosting market participation. While cryptocurrencies have yet to be adopted as a mainstream mode of payment, technological advances and updates continue to enhance their usefulness. Cryptocurrency enthusiasts desirous of making investments should keep a close eye on what they are buying, and should make sure they really understand what’s on offer in ICOs before jumping in with their hard-earned money. (See also: How to Identify Cryptocurrency and ICO Scams.)
Investing in cryptocurrencies and Initial Coin Offerings ("ICOs") is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns no cryptocurrencies.