The blockchain industry of today looks much different from that of late 2017. Projects are generally more subdued, more cautious and significantly less numerous. However, just over a year ago, the cryptocurrency market was exploding with new cryptocurrencies. Any problem that could potentially be solved with blockchain technology invariably had an upcoming Initial Coin Offering, or ICO.
These ICOs allowed users to invest cryptocurrency in the project ahead of the actual token release. The process had more in common with a Kickstarter campaign than a traditional IPO – but it allowed users to get involved with potentially lucrative projects before their cryptocurrency gained steam. Eager to find the next moonshot, investors flocked to these ICOs.
The Raw Numbers and Ethereum’s Popularity
In the first three months of 2018 alone, ICOs raised over $6 billion USD worth of Ethereum – even as the market began to slump. A report on ICO treasury holdings suggested that ICO development teams have issued the equivalent of $24 billion USD worth of tokens to themselves. Although the real value of these tokens is much lower due to liquidity and falling prices, it remains a staggering amount. While some of these projects have released working products or continue development, many have failed outright – with ICO refunds being extremely rare, or even non-existent.
Ethereum disproportionately represented investment into ICOs. Most projects intended to use the ERC20 standard token as their code base, and the Ethereum both helped fund the project and keep it running on the Ethereum blockchain through the price of gas. While there are now viable alternatives, Ethereum held the top spot for development blockchains throughout 2017 and into the first half of 2018.
The Impact of the ICO Boom on Ethereum’s Price
At the height of the cryptocurrency boom, the price of Ethereum fluctuated around $2,000 USD per ETH. Many investors wondered if ETH would one day overtake Bitcoin – seeing Ethereum as a blockchain with real usability, compared to the store-of-value status of BTC. Now, Bitcoin is down to a mere 20% of its all-time-high, but Ethereum is even lower. At a mere 6% of the ATH, Ethereum suffered greatly at the hands of the bear market, and many analysts believe this is a result of the ICO boom.
The Ethereum invested in ICO projects does not represent direct funding unless it is liquidated. In order to do so, the projects need to continuously sell ETH on the open market. This constant trickle of sales may be a massive contributing factor to the suppressed price of Ethereum. Over 400,000 ETH left ICO treasury wallets at the end of 2018. The bright side of this news is that it would mean a temporary suppression. Once the ICOs have completed their liquidation, Ethereum may see a price resurgence – a welcome relief for many investors holding the cryptocurrency.
Article By: Adam Stone
