The initial coin offering (ICO) industry finds itself in a bit of a pickle. On the one hand, the SEC is cracking down on illicit securities offerings. On the other hand, the prices of ICO tokens are crashing hard. This is not a great development for the industry as a whole.
The ICO Tokens Are Crashing in Value
Buying into an initial coin offering is always a certain risk. The perceived value of these tokens may not necessarily reflect their actual value. As of right now, close to half of all ICO tokens are trading at a lower price. More specifically, they are valued below the initial offering price. This doesn’t please investors in the slightest, yet it is not exactly a surprising trend.
"40% to 50% of ICOs are currently underwater – trading at a price lower than the initial offering price." – @ccatalini #MITBitcoinExpo2018
— Jameson Lopp (@lopp) March 17, 2018
A lot of these tokens are priced at a value which is pulled out of thin air. For example, ICO tokens can be worth $1, because the company wants to sell X amount of tokens at that price to raise Y amount of money. That doesn’t mean said token is actually worth $1 now, or in the future. It is the price investors will pay to get their hands on new ICO tokens accordingly. Some more thought needs to put into how these tokens are valued.
With around half of all ICO tokens trading below ICO price, a very worrisome situation ensues. Reclaiming the lost value will not be easy whatsoever. All markets have turned ultra bearish right now. Stopping this gushing wound from bleeding will be very difficult. As such, most of these ICO tokens will continue to lose value as investors are cutting their losses.
The Growing List of Empty Promises
Even without a bearish cryptocurrrency market, most ICO tokens wouldn’t be in a good place right now. With so many projects “promising” great things, it’s only normal investors lose patience. The vast majority of initial coin offerings have no working code or a product. While MVPs are usually unveiled within six months, people active contribute money to projects which can be labeled as “vaporware“.
All of this makes one wonder how ICO tokens need to be valued from day one. Projects with no working code or product have, on paper, a value of $0. As such, their tokens should be valued at $0 as well. Unfortunately, that is not how ICOs work these days, and ICO tokens will receive an arbitrary value at all times. This situation is unsustainable in the long run, though.
For now, we will have to wait and see what the future holds for all of these tokens. Right now, things are not looking great. Even projects with a working product or code are suffering from the massive cryptocurrency onslaught. Turning this ship around will not happen anytime soon either. Everyone is looking for quick profits or ways to cut losses. The long-term perspective is not a priority for most ICO investors and speculators by any means.
