TLDR – All ICO’s which raised funds between December – February of 2018 are probably royally screwed if they didn’t cash out promptly.
During the run up to last year and into the beginning of this year, the positivity for ETH and all ICO’s was spectacular. Every ICO, good or terrible was raising loads of ETH all with the expectation that the ETH party train would keep on chugging higher. A common question I would ask founders was “how much are you going to cash out?” The reasonable answer would have been 60-80%, with a little ETH left over to cover any crypto related costs and pay for random things. The resounding answer, however, was “are you crazy? We’re going to keep the ETH, it’s going to double in value and Kaching!! We’ll give lambos to the entire staff as bonuses!”
Here is what those founders real did. They made a bet, a gamble, and a very risky one on price movements of an extremely volatile asset. During one of the greatest bull runs of any asset class ever, they decided to put the safety of their future operations and growth potential, as well as investor returns. Essentially they made a semi leveraged Forex trade against the USD or EUR, choosing instead to short it when it has been experiencing one of its greatest strength rallies over the past year.
Now, it’s crypto winter, ETH is plunging towards 200, BTC is regaining dominance and many, many ICO’s are starting to have treasury issues. Take for example this Trustnodes article which showed how more than 100,000 ETH had been dumped by ICO’s in the past month.
Around $40 million worth of eth has been liquidated in the past month with nearly 100,000 eth sold by projects that raised funds through an Initial Coin Offering (ICO).
Data by Santiment, which tracks a number of ICOs, shows a project called Atonomi sold 12,000 eth, 9,000 of it on July 26th.
Atonomi made the right decision and cashed out (hopefully) just a few days after the end of their TGE. Their token holders on the other hand were not so lucky, they (including me) were dumped on hard post launch.
Rumors are now starting to go around that other big name ICO’s who raised capital six months ago are now having cash flow issues.
I have a few suspects which could be the project Ran is alluding to, but nothing concrete yet.
There are no good outcomes here. The companies which decided to take a risk and bet on ETH are now seeing their runways cut from 3-4 years down to less than 1. Without further injections of cash, many are bound to fail. I would expect in the latter part of this year to see the first wave of ICO’s begin to shutter and declare bankruptcy. Think Bitconnect, but on a much, much larger scale. Viable projects with sound ideas may simply shut down over night, leaving the bagholders to dump as fast as possible as the token tends towards zero.
I’ll be spending the next few weeks getting in touch with these projects and inquiring about the health of their finances. I hope this will help identify which ICO’s are suffering and have a larger chance of failing, versus those who had the insight to cash out and focus on developing.