20 Oct EY Report: 86% of top ICOs lost value, 30% lost all value
A new Ernst and Young (EY) report paints a pessimistic picture of ICOs, showing 86% of the top 140 ICOs from 2017 lost value and 30% lost “substantially all value.”
The most telling fact is that an investor purchasing a portfolio of these 140 ICOs on January 1, 2018, would most likely have lost 66% of their investment by October.
Few have working products
From EY’s December 2017 analysis, the picture is not much brighter with this October 2018 update on ICO investments.
Here are several report highlights:
- only 29% (25) have working products or prototypes (up from 13% in Dec)
- of the 25, only seven accept payment in fiat currency or tokens, reducing the value of tokens
- some projects have “detokenized” and now only accept fiat currency
- top 10 were mostly blockchain infrastructure projects
- more than $15.6 billion raised by ICOs in the first half of 2018; top 10 raised 52% of all funds
- 90% of ICOs used the Etherium platform to issue tokens are although many developers have cashed out some of their investment gains or used proceeds to fund continued development.
The report says:
“However, the early returns from ICOs are not encouraging. Compared to traditional venture capital investing, ICO-backed companies look like they offer more risk baased on a number of factors including the lack of progress towards usable products. The highest performing ICO investments in the last year have been mostly focused on blockchain infrastructure, while those focused on blockchain-enabled applications and business ecosystems generally have performed poorly.”
What’s ahead for ICOs?
EY makes several predictions investors should note.
It predicts funding will likely shift away from retail investors towards venture capital and digital asset-focused investment funds that can understand and manage the downside risks.
EY also says regulatory concerns will continue to limit investments by certain classes of investors such as non-accredited investors in the US.
For all the excitement and billions of dollars invested in ICOs, the returns are not there for investors and the project success rates are discouraging.
EY expects to do another update in a year and our guess is results will once again be less than positive. You can view the EY slideshare presentation here.