A Post-Mortem On The ICO Bubble: At Least 89% Of ICOs Are In The Red
It’s now clear that initial coin offerings (ICOs) were a massive bubble. The median ICO return in terms of USD is -87% and constantly dropping.
ICO failure can very easily be explained by misaligned incentives between founders and investors. Unlike in the venture capital model, the founders raised money from unsophisticated (mostly retail) investors with a product in very early stages. Moreover, ICO investors had no claim on the project’s assets or to a percentage of the company profits in perpetuity. With few exceptions, nearly no ICO projects were able to capture value in its utility tokens.
The ICO statistics widely differ depending on the source. The highest estimate, from ICObench, says that there have been more than 5,600 ICOs that raised a total of $64.5 billion. The lowest figures say that at least $14 billion has been raised. The disparity is likely caused by the high number of ICOs that lied about how much they raised as well as whether they included private
token sales. Interestingly enough, though, all the sources agree on the trend —ICO mania peaked in December 2017 and has declined ever since.
ICO return data is even harder to come by; simply because most of the projects have already closed their doors or because their tokens are completely illiquid. ICO Drops has the largest data set for ICO/IEO returns with 444 projects in total. If we only consider the projects that raised money prior to 2019, in order to isolate the IEOs that are also included in the data set, there are 389 ICOs.
The distribution of these ICOs by month of raise shows a nearly identical trend with the amount of funds raised. Most of these ICOs finished raising funds in December 2017 and January 2018.
The average ICO in this data set raised $36.2 million while the median raise was $18 million. In total, they raised nearly $14 billion.
In terms of USD, only 10.8% of all the evaluated ICOs still have a positive return. This figure would be much lower if all the ICOs were included — most of which don’t even exist anymore. The median USD return is -87%. There have been 11 ICOs with a return of more than 1,000%. The five best-performing projects that had an ICO are
Ethereum (74,239%), IOTA (48,150%), BNB (28,060%), NEO (5,895%), and Stellar (3,935%).
Only 30 ICOs (7.7%) have outperformed bitcoin, which is perhaps an even more relevant metric when it comes to ICO returns. More than 74% of all ICOs have lost more than 90% in terms of BTC. The median BTC return is -91%. The five best-performing ICOs in terms of BTC are BNB (5,902%), IOTA (1,744%), Ethereum (1,339%), Lambda (962%), and ChainLink (668%).