A startup just closed a huge $4 billion ICO - but the crypto fundraising method is 'absolutely and unequivocally slowing down'
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- Autonomous NEXT: $9.1 billion raised through ICOs so far in 2018.
- But if you strip out two mega deals - Telegram and Block.one - deal activity per-month is lower than at the end of 2017.
LONDON - Cryptocurrency startups have raised over $9 billion through so-called initial coin offerings in 2018, according to consultancy Autonomous NEXT, but the rate of activity is slowing down.
"Well, there doesn't seem to be another way to say it - ICO activity is absolutely and unequivocally slowing down," the financial consultancy said in an email newsletter on Monday.
ICO, short for initial coin offering, is a new form of fundraising activity that became hugely popular in 2017. Startups mint their own digital currencies, structured similarly to bitcoin, and sell them in exchange for bitcoin or ether. These cryptocurrencies can then be sold for fiat currencies or used as funding themselves.
These coins are often linked to an underlying product or company but there are no requirements for this. Regulators around the world have warned investors that ICOs are speculative, high-risk investments.
Startups, most of them looking at blockchain technology, raised $6.6 billion last year through ICOs, according to Autonomous NEXT, and have raised $9 billion via ICOs so far this year.
While that already eclipses the 2017 total, Autonomous NEXT said this figure is boosted by two mega deals that are unlikely to be sustainable.
Messaging app Telegram, which is hugely popular with the crypto community, has raised $1.7 billion through an ongoing ICO while Block.one, the startup behind the EOS token, on Friday closed a $4 billion raise.
"If we pull out Telegram and EOS on a monthly basis, the monthly trend look severely down - to $560 million from a high of $1.5 billion in December 2017," Autonomous NEXT wrote.
"So unless you believe in the continued presence of mega deals, token offerings have indeed been dragging due to continued regulatory uncertainty, tax overhang, and a lack of tangible progress in software adoption by the mainstream consumer."
The consultancy said it is hopeful that deal activity will pick-up once regulators take more definite action to establish a framework around ICOs.
"Just look at the Internet wave: March 2000 was the peak value share a percentage of market capitalizations," the consultancy wrote. "Despite the crash, the web has never been more present or important than today. Will crypto follow the same hype cycle curve?"
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