Initial Coin Offerings had an explosion in popularity in 2017 as the markets took off. A long way from their beginnings in 2013 with the first token sale of Mastercoin, ICOs have managed to raise over $6 billion in 2018.
Many of these crowdfunded projects were built upon the Ethereum (ETH) blockchain and collected Ether as a source of funds. Recently, however, many ICO projects have begun the liquidation of their treasury balances as the market further collapses.
Diar, a data resource for analyzing digital currencies and assets, has analyzed 100 ICO project ETH wallets over the course of 2018.
Various projects have been liquidating their treasury balances, with some cashing out their Ethereum holdings in massive selloffs as prices sank throughout the year.
The various projects collectively had over 4.6 million ETH in raised funds in January of 2018 but sell-offs over the year have brought that number down to just above 3 million.
As Ethereum has been dragged down from its high of around $1,300 to $135 at the time of this writing, the remaining 3 million in ETH has plummeted from a value of over $3 billion to barely $350 million.
More than 420,000 ETH has been liquidated in December alone, making the largest bulk of the treasury withdrawals at the very bottom of the current market. The average monthly withdrawal for 2018 has been around 2.45 percent, but December saw a massive 12.20 percent withdrawal of ETH.
Nearly half of the total withdrawn ETH in December came from a single project’s liquidations — Filecoin that sold its entire holdings of 216,906 ETH. The decentralized storage solution provider initially raised $257 million in their ICO, but now takes pennies on the dollar.
Aragon, another large liquidator, has moved nearly 40,000 ETH into a MakerDAO Collateralized Debt Position (CDP) as protection from volatility.
The various forms of hedging against the current market conditions are coming a bit late for many of these projects. Selling at the local bottom of the market is certainly not a wise financial decision, and its likelihood of creating troublesome legal situations is worse.
The scrutiny many ICOs are facing by the U.S. Securities and Exchange Commission may wreak further financial havoc on projects that are forced to return U.S. investor funds. The SEC has previously made clear that “capital raising through blockchain requires compliance with federal securities laws.”
Many projects have not filed to be securities offerings, but the SEC is ruling them as securities regardless. China and South Korea have previously banned ICOs from operation and sales within their borders altogether.
The future of ICOs will likely only favor the compliant and those who truly have a beneficial product to provide.
The days of raising mass funds by ICOs are over as cryptocurrency regulation take hold on the industry, and funds are sold off at lower prices.
ICO involvement has proven lucrative for some investors in the past but exceptionally risky and damaging for others. It is better for the state of the industry that they no longer have a cash crop status.
You can track many of the analyzed projects ETH movements themselves with Dapp Capitulation.