Nearly Half Of All ICOs Last Year Have Already Failed... And That's A Good Thing

Authored by Simon Black via,

The Securities and Exchange Commission clamped down on cryptocurrency firms last week in a major way.

The regulatory body issued dozens of subpoenas (some groups estimate more than one hundred) to companies that conducted or advised on initial coin offerings (ICOs).

Notes readers aren’t surprised, as I’ve long warned that the scammy ICO market is one of the biggest bubbles I’ve ever seen.

Before discussing the fraudulent nature of the space, a bit of background on ICOs…

A lot of people view ICOs as an asset class like stocks, bonds or real estate. But that couldn’t be further from the truth.

Initial coin offerings are simply a funding scheme. Companies looking to raise money will post a white paper on a website, post some pictures of their “C-suite executives,” and set up a Twitter account… that’s basically it.

The goal is to raise funds by issuing “tokens.” These tokens typically serve as pre-paid credits that can be used within the ecosystem of the company raising the funds. In other words, you’re not actually getting equity in the company… you’re buying a gift card.

Think of it like the in-game credits you would buy (with real money) to get ahead in the old Facebook game, Farmville. Outside of Farmville, those credits are worthless.

With almost no information, and the obvious, inherent risks to buying a prepaid service, investors are supposed to evaluate if there’s a valid, secondary market for these tokens.

In the face of these many flaws, prices of these ICOs would soar. Not for any fundamental reasons… simply because we were experiencing a massive bubble fueled by hype.

And the prevalence of outright fraud caught the attention of the SEC.

One company called Prodeum was allegedly developing a blockchain for agricultural commodities.

Prodeum raised $11 million through an ICO. Then the founders (who were likely made up in the first place) disappeared without a trace. And the only thing left on the company’s website was a single word – “penis.”

Despite the many warning signs, companies have still raised nearly $9 billion to date through ICOs. And a lot of that money has simply disappeared. recently completed a study of the 902 ICOs that took place last year.

Of those, 142 failed at the funding stage.

Another 276 failed after either taking the money and running or simply failing as a business.

So a full 46% of all ICOs last year have already failed.

But it gets even worse…

An additional 113 ICOs, according to, are “semi-failed” because the founders have ceased communications with the public or because the community of users is so small there’s zero chance of success.

Once you add in these “semi-failed” firms, 59% of last year’s ICOs are goners.

Think about that failure rate… it’s astounding. And that’s in one year’s time.

I’m certain that percentage will only increase.

The vast majority (90+%) of cryptocurrencies and ICOs will fail for one simple reason… they have ZERO utility.

People forget, but when you participate in an ICO, you’re actually investing in a business. And that business has to provide value in order to justify its existence.

Let’s look at a couple of the more useless offerings of the past…

Skincoin allows you to get new “skins” for guns in video games. It raised $3.3 million.

There’s also a TrumpCoin meant to “support President Trump and his vision of making America great again.” I have no idea how that’s even a token, but TrumpCoin was worth $3.38 million at its peak.

I seriously doubt there will be much demand for Skincoin or TrumpCoin over the long term. And the fact that these types of coins are on their way to extinction means the market is working.

And while I’m no fan of government regulation, operators in the crypto space are welcoming more regulation... because it gives them clear rules and guidelines to follow as a business. Some lawyers have said the SEC’s recent round of subpoenas was meant as an invitation to have a more open dialogue with these firms.

Of course, I could think of a better way to start a conversation.

But once there’s a clear delineation of what’s legal and what’s not when it comes to crypto and ICOs, more mainstream players and investors will get involved. And that will lead to a larger, less volatile marketplace.

But ultimately, the value of these tokens is driven by demand.

And in the long-run, demand has to be driven by some sort of utility. The coin must present some special benefit that other coins and tokens don’t have… and that people will actually NEED.

I’ve been talking a lot this year about avoiding big mistakes. Luckily, the ICO market is an easy one to avoid.

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If you are interested in speculating in Cryptocurrencies, I encourage you to download our free Crypto Currency Report - A Different Perspective on Crypto. More and more people want to dive into crypto currencies and everyone’s focus is on Bitcoin’s price. But, the price is not what matters... I see so many people make the same wrong assumptions and mistakes that could be fatal to their capital. That’s why my team and I have written this special report where I share a different perspective on cryptocurrencies.



HRH of Aquitaine 2.0 MadHatt Wed, 03/07/2018 - 20:04 Permalink

Not when you buy. But you should check the IRS codes. There is a tax on PMs when you sell. They are taxed as collectibles. If you have proof of purchase, depending on how long you held silver or gold, when you sell you do have to pay either short- or long-term capital gains tax.

As I recall, has an excellent primer on this topic, with pictures. Oh look, I found that infographic:

In reply to by MadHatt

Rhetorical lester1 Wed, 03/07/2018 - 19:36 Permalink

 Reverse shilling or Pajeetly clueless on crypto are the two adjectives most likely to describe you.

Tons of people haven't cashed out yet, hence no taxes. 2017 was truely the first year that you needed to no more than fuck all as far as your taxes were concerned. Why the US is a massive market for crypto it's by no means the majority or even the leader as far as the payment platforms go. So if you really have fuck tons in crypto the IRS can do a sweet fuck off if you're really serious about avoiding taxes as you'll have plenty of money to buy citizenship in another country.

In reply to by lester1

lookslikecraptome Yellow_Snow Wed, 03/07/2018 - 20:32 Permalink

Not sure. However they may be able to read crypto charts, assess sentiment, understand spoofing, wash-trading; be able to google the benefits of crypto currencies and the problems with crypto currencies, watch the crypto ppt, be knowledgeable of amyway, understand that the wealth distribution in cryptos is a 1% phenomenon, look at volume, be knowledgeable about exchanges, how the operate, costs associated with them, and trade confirmation time, Read the news, etc, etc, etc, .

Your question is like who can evaluate options or the Swiss franc without be a trader of those instruments?.  I do not know. But I guess there are plenty of people that do not own them can do all of the foregoing without actually owning crytpo. I guess you have the right to comment on the es or the SP, the Dow and or the Nasdaq. Hope that helps. Cheers. 

In reply to by Yellow_Snow

MadHatt Wed, 03/07/2018 - 17:49 Permalink

The problem is the lack of due-diligence on the investors. People invest in things they do not understand and for some reason, refuse to google.

Taking someones word for it because you saw their youtube channel or facebook post is how you lose money the fastest.

There are no bitcoin doublers, there are no trading bots that produce 1% daily, and when you send off your bitcoin for something, its already gone... if you get anything back, you're one of the lucky ones.

If you don't have a private key, you don't own it.


That all being said, no investment is a 100% guarantee of returns.

MadHatt HRH of Aquitaine 2.0 Wed, 03/07/2018 - 20:17 Permalink

This comment was just to the subject of the article and its contents, it wasnt directed at anyone in particular. 

I do mine as well, but there are a lot of large ponzi schemes out there right now.

All lending platforms for instance. 


Id edit my comment to clarify (but then the thread makes much less sense, and its not fair to your response) but, what I'm saying is that its up to the investor to know what they are getting into. Just because it has a blockchain, doesnt mean its on autopilot to success. 

In reply to by HRH of Aquitaine 2.0

HRH of Aquitaine 2.0 MadHatt Wed, 03/07/2018 - 20:23 Permalink

Yes, I fully understand that any buyer / investor / speculator in this area needs to be informed.

I have repeatedly called out Reggie Middleton, and VERI, as nothing but a scam ICO. The exchange which was claiming Tether tokens as equivalent was obvioulsy a fraud. There are many others. I have only bought, sold, and trained BTC, BCH, ETH, and LTC.

As the Latin saying goes: caveat emptor.

In reply to by MadHatt

tion Wed, 03/07/2018 - 18:26 Permalink

>Initial coin offerings are simply a funding scheme.

>In other words, you’re not actually getting equity in the company… you’re buying a gift card.

>People forget, but when you participate in an ICO, you’re actually investing in a business.


Come on, Simon.