The latest statistics regarding ICO funding in recent months shows that investors continue to turn away from investing in ICO projects amidst the persisting crypto bear market.
The statistics, which were reported in the latest issue of the Diar digital asset newsletter, show that ICO fundraising in November plummeted to the lowest level of 2018. The drop in funding is likely tied to the cryptocurrency markets, which set fresh 2018 lows towards the end of November when Bitcoin fell to $3,600.
Since then, Bitcoin has continued to trade sideways, and just recently set another fresh 2018 low at $3,300 last week. Because ICO fundraising appears to be linked to the cryptocurrency market conditions, it is likely that December will also be a rough month for ICO fundraising.
ICO Fundraising Falls to 2018 low Amidst Crypto Market Turbulence
According to the report, in 2018 alone ICOs have raised a total of over $12.2 billion, most of which came from the first five months of this year. ICO projects raised the most amount of money in February, during which over $2.6 billion was raised. January was the second-best month for ICO projects looking to raise capital, with $2.4 billion being raised.
Fundraising then declined steeply in March and April but rebounded in May. Since then, ICO fundraising has steadily declined, and has nearly disappeared in November. Diar notes that last month, ICO projects only raised a mere $65 million.
“Initial Coin Offerings (ICO) are all but over with November seeing total raised funds at $65Mn. ICOs in 2018 have raised over $12.2Bn but have now petered out from regulatory backlash fears, as well as a slow-down in cryptocurrency markets with token prices plummeting leaving retail investors with a bitter taste,” the report explains.
Regulatory Concerns A Huge Factor in ICO Decline
Although some countries are taking actions to promote regulated capital raising through token offerings, the United States has yet to institute any type of legal framework specifically for ICOs, and in their current state they have been deemed to be securities products.
During a recent speech from the Securities and Exchange Commission’s (SEC) chairman, Jay Clayton, he noted that although ICOs can be an effective way to raise capital, they still must adhere to traditional securities laws.
“ICOs can be effective ways for entrepreneurs and others to raise capital. However, the novel technological nature of an ICO does not change the fundamental point that, when a security is being offered, our securities laws must be followed,” Clayton said.
Clayton also noted that ICOs expose investors to additional risks, including a lack of protection that comes with traditional equities, and increased exposure to potential fraud and manipulation.
Diar concluded their report regarding the current state of ICOs with a pessimistic outlook, stating that without proper regulatory frameworks from global regulators, they will likely continue to lose their popularity.
“It’s unlikely the contentious fund raising mechanism, at least in its current unregulated format, to garner much interest moving forward with regulated tokenized securities platforms paving the way for a new realm of finding investor capital.”
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