The ICO boom came, went, and according to Larry Cermak, will never return again. 

Initial Coin Offerings Boomed then Burst

Earlier this week research analyst Larry Cermak boldly proclaimed that the 2017 ICO boom was indeed a bubble that will never recover. 

If true, the news will strike fear into the bag heavy hearts of investors who backed up the truck and loaded up on altcoins which are nowadays affectionately referred to as ‘shitcoins’.

To date, the median USD return offered by Initial Coin Offerings is -87 percent and the figure continues to plummet.

USD return of ICOs

USD return of ICOs

According to data provided by Cermak, the ICO boom eventually burst because of “misaligned incentives between founders and investors.” 

It’s now common knowledge that in addition to raising funds from ‘unsophisticated’ retail investors, many token sales projects mismanaged funds and were nowhere near having a multivariate product. 

Many startups also lost the capacity to function as the practice of keeping the bulk of their funds in Ethereum and Bitcoin backfired when the market turned bearish right at the start of 2018. 

At the start, public token sales were a revolutionary way of raising funds and appeared to be an equalizer that gave the average unaccredited investor access to investment opportunities typically reserved for venture capitalists and institutional investors. 

The drawback was this unconventional method of fundraising left investors with little legal recourse for making a claim on projects that proved to be fraudulent or mismanaged. 

As the chart shows, the amount of funds raised through ICO has dropped precipitously since January 2018. 

Funds raised by ICOs

Funds raised by ICOs

Even more disturbing is the fact that: 

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.

ICOs Faired Even Worse Against Bitcoin

Cermak’s assertion that ICOs will never re-attain their 2017 valuation is supported by data showing that the spread of crowdsale funding growth and the total number of ICOs peaked in December 2017. 

Numbers of ICOs conducted

Numbers of ICOs conducted

Even more interesting is the fact that only 10.8% of ICOs still provide a positive return in USD. 

Cermak notes that this figure would be significantly lower if data from all Initial Coin Offerings were included. Cermak found that “the median USD return is -87% [and] there have been 11 ICOs with a return of more than 1,000%.” 

When compared against Bitcoin, “only 30 ICOs (7.7%) have outperformed Bitcoin” and Cermak found that 74% of all ICOs dropped more than 90% in BTC terms. 

Cermak said: 

The median BTC return is -91%.

Will IEOs Follow ICOs?

As for ‘successful’ Initial Coin Offerings, investors who took a position in BNB, IOTA, Ethereum, Lambda, and ChainLink will be thoroughly pleased to know that these are the five highest-performing crypto crowdfunding campaigns in BTC terms.

For those wondering about the performance of all the other ICOs, Cermak was kind enough to provide the following chart: 

Cermak concludes by encouraging investors to consider that if 89% of all Initial Coin Offerings produced a negative USD return and if IEOs are “starting to manifest the same trend”, then what might this mean for future IEOs? 

Do you think IEOs will eventually all follow the same path as ICOs? Share your thoughts in the comments below! 

Images via Shutterstock, Twitter: @lawmaster

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