Is The ICO Market Truly Dead?
Recently, more than one analyst has gone on the record to state that the market for initial coin offerings (ICOs) is basically dead.
However, are these rumors of demise overblown?
Michael Novogratz, founder, CEO and chairman of Galaxy Digital, told Bloomberg last month that "The ICO market is pretty much dead right now."
Barry Silbery, CEO and founder of Digital Currency Group, concurred, telling CNBC in an interview that the ICO was "dead" and "over."
[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
Token Sale Evolution
However, several market observers have asserted that ICOs are not dead, they are simply evolving.
"ICOs are not dead, far from it," said Matthew Unger, founder and CEO of iComply Investor Services inc.
John Hargrave, publisher of Bitcoin Market Journal, offered a similar point of view.
"The ICO market is not dead, but changing," he claimed.
Hargrave pointed to Google Trends data, emphasizing that search interest for the term "ICO" has fallen sharply over the last year.
While a score of "100" represents peak search interest, this measure has been closer to 10 over the last few months.
Rise of STOs
He emphasized that the search interest for the term "STO," which stands for security token offering, has been fluctuating far closer to all-time highs in recent months.
Unger also spoke to the proliferation of these sales, stating that:
"For every ICO we see going live today there are at least three security tokens being launched."
Eric Ervin, CEO of Blockforce Capital, also spoke to this transition taking place in the market for digital token sales.
"As they continue to mature and people become more familiar with blockchain technology, we expect STOs to become more prolific," he stated.
"In short, ICOs aren’t dead, investors are just doing more due diligence and looking for more credible and vetted projects," said Ervin.
Crypto Wealth Effect
While the landscape for digital token sales is clearly changing, shifting toward STOs, another factor that is contributing to lackluster ICO activity is the sentiment of investors, said, analysts.
"Global Ether buyers/owners have MUCH less 'house money' to spend," said Sean Walsh, CEO of crypto mining firm HyperBlock.
Ether was trading close to $125 at the time of this writing, far below the value it had at many points in 2017 and 2018.
When ether was more valuable, it likely made those who held it feel affluent.
According to the wealth effect, people are more likely to spend when they feel well off.
In this case, the assertion is that investors were more likely to take part in ICOs during the bull market because their crypto holdings were substantially more valuable.
However, the value of the crypto market has fallen sharply over the last year, causing the net worth of many digital currency investors to dwindle.