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Crypto Startups Going Bankrupt Amidst Market Crash

Blockchain, Cryptocurrency–While investors are left holding the tab from the plummeting crypto market, with this week seeing a relative low for Bitcoin since peaking at $20,000 in December 2017, crypto-based startups have also had to contend with the fallout.

On December 6, Bloomberg reported on a round-up of cryptocurrency startups that are closing doors amidst the most recent price rout for Bitcoin and the broader altcoin market, starting with ETCDEV–the group behind the launch of Ethereum Classic.

ETC, seventeenth in market capitalization with a value of over $400 million, announced last week that it would be closing shop following a shortage of funds and inability to raise more capital to keep the project afloat. Igor Artamonov, founder of ETCDEV and the forked coin of Ethereum (ETH), spoke in an interview on the state of his company in the context of the broader falling market,

“There are a few things that happened at the same time. I am sure if that happened a year ago, that wouldn’t be a problem at all, a year ago there was a lot of free money in the market. But in a bear market there’s a change.”

ETCDEV is not the only crypto based company to take a hit in the present market, with the Bloomberg report including actions by ConsenSys, a software company based out of New York, to cut its workforce by 13 percent as a direct result of falling coin prices. In November, content publishing platform Steemit Inc., which also created the currency Steem (STEEM) to facilitate in-house transactions, had to layoff 70 percent of its employees.

Bloomberg lays the majority of the blame in projects over-extending themselves on digital assets, setting up significant losses as a result of 2018’s ongoing bear cycle,

“Many of the companies are suffering because they kept a portion of their funds in digital assets, whether in tokens they sold through initial coin offerings or in Bitcoin and Ether, which served as the preferred means of exchange in the crypto world. As prices collapsed this year by more than 90 percent in some cases, and their so-called digital wallets thinned out, many developers found they couldn’t raise additional funding.”

With the decline in crypto prices and the demand for ICOs, many projects that made their fortune collecting coins in exchange for issued tokens have had to contend with the ill effects of a collapsing market. In addition, the landscape for fundraising has vastly shifted, with projects no longer being able to raise millions on a whitepaper alone or by including “blockchain” in a company title.

In some ways, the declining market may have the effect of pushing better projects to the top of the heap, with efficiency being valued over greed. Given the sudden boom cryptocurrency experienced in 2017, with coin prices rising several thousand percent for many currencies by year’s end, the gold rush for blockchain and ICOs created a scramble that is still having negative effects on the industry. The focus became on launching projects rather than promoting durability, quality and real world use–a hallmark of an inflated and destined to crash industry.

With prices and the market resetting to a valuation to that of over a year ago, cryptocurrency will find itself of having to do more with less, which includes focusing on development routes that will lead to the greatest adoption by Main Street customers while drawing the interest of Wall Street investors.

The post Crypto Startups Going Bankrupt Amidst Market Crash appeared first on Ethereum World News.

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Brian Kelly Believes ICOs Will Be Held to a Higher Standard

Initial Coin Offerings (ICOs)–Brian Kelly, founder and CEO of the digital investment firm BKCM LLC and a regular on CNBC’s popular crypto-based programming, has said in a recent interview that he believes the days of ICOs coming out of nowhere to million-dollar valuations is over. Instead, he believes the market has already moved towards a more mature view of the innovative funding cycle of cryptocurrency, with ICOs largely being held to a higher standard than they were even at the start of the year.

In part, the new approach has been forced upon the market and investors due to the ongoing bear cycle conditions. Rather than being flush with capital from Bitcoin and altcoin bull-runs to end 2017, most crypto investors are having to take a spare approach to their investment, in addition to legitimate fears over where the price of crypto will be at the start of an ICO buy-in versus when the coins are actually released on the market.

Speaking in an interview with CoinTelegraph, Brian Kelly expanded on his view of ICOs and how he sees the market responding to such a shift. As opposed to doing away with the controversial, and at times outright scammy method for raising capital, Kelly believes the initial coin model will stay for some time in cryptocurrency, albeit at a change from current standards,

“It will stay,” Kelly said, “but with a little change.” He went on to add, “the days of a whitepaper and a dream and $30 million are probably over.”

Kelly also gave details on what he considers when reviewing a project to invest in, listing positive factors such as promoting activities that will increase network adoption, as well as having a strong presence in industry catalysts such as conferences.

Despite regular news stories of ICOs making off with investor funds or failing to fulfill whitepaper promises (the most damning being a study published in July that found 80 percent of all ICOs could be classified as a scam) the overall health of the market has been strong throughout the year. Since the midway point, ICO volume in 2018 already doubled that of the previous year, with developers in nearly every industry flocking to cryptocurrency to cash in on what they view as easy profit. At the very least, the ICO model does provide a fast and efficient way to raise funds for projects, as opposed to the more gated approach of raising through angel investors and venture capitalists.

However, ICOs also provide very limited returns for investors, particularly those who are hoping to hold their coins for appreciation or as a long-term investment in a project. Research out of the Boston College Carroll School of Management found that over half of all ICOs die within the first four months of reaching the market, with the vast majority of profit to be made occurring in the first two weeks. Investors who fail to sell in that window are not only exposing themselves to much greater risk relative to their early cash-out counterparts, but they also run the risk of the entire project collapsing or failing to gain any adoption via exchanges.

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