Crypto StartUps are Failing

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Cryptocurrency start-ups have had a rough year with a huge section of them laying off loads of their workers with the  Bitcoin price crash. Bitcoin has lost around $280 billion of its value this year alone, and the value of all digital tokens as at the time of posting has lost about $600 billion. So, comes with it a struggling market that has now led to a decline in cryptocurrency start-ups, Especially those that invested this year, banking on the close of 2017 prices.

Coinbase, for example, gained a surging number of customers since October 2017 and March 2018. The company is the largest coin brokerage in the U.S. ETCdev, following the incredibly volatile market conditions in 2018 has announced that it will be closing its doors due to lack of funds and being unable to raise more capital to keep the company afloat. This is despite the fact that the company is among the top most successful cryptocurrency start-ups, having launched Ethereum Classic and having a market capitalization value of $400 million.

As of September 2018, the cryptocurrency funding level recorded its lowest figures standing at $279 million, just shy of the required $300 million mark. Since cryptocurrency ICOs heavily depend on funding, the decline was blamed on the stricter regulations that have been put in place for most of this year mainly from the SEC, classifying ICOs as securities made it difficult for crowdfunding to function like it used to before since the funds were now subjected to securities law and scrutiny.

According to a recent post by Tech Crunch, another reason start-ups are failing is that the sheer amount of money being crowdsourced for cryptocurrency projects is simply frightening. Hence the inevitable scrutiny by regulatory bodies. According to tech experts, too much fuel in such a short period of time will always end up consuming the project and the drivers of the ICOs.

The marketing tactics are also very weak on the trust levels in the sense that ICOs are marketed via multi-level theory, just like Ponzi and pyramid schemes. Therefore creating greed for quick money and the fact that the future of the tokens is not analysed only opens doors to fraudulent funding.

David Schumpeter; Eidoo utility token backer,  is calling this ‘creative destruction’. First of all, with the failing start-ups, what is alarmingly clear is that majority of the investors are actually quiet about so much money going down the drain. According to David, the destruction of these failed ICOs is good news to some of the investors who do not plan on letting the whole idea collapse but are waiting for the ‘inevitable’ recovery of the market since the value of their investments will increase.

If the market recovers, which is hopefully soon, it will be very interesting to see how start-ups will come back from this mess.

 

 

 

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