Crypto Winter keeps bringing its chill to the ICO market, with all demand numbers weakening, while the supply side keeps growing, even if slowly. Blockchain related projects are still hitting the market hoping to raise money with the help of an ICO, but more and more of them are failing.
I have had this idea for long, that ICOs are a great innovation, but for a very limited number of startups. Utility tokens are designed as a tool to use the product created by the project, but its usage by ICOs as an investment vehicle is increasingly showing its weakness in this bear market – investors have both less money to invest and less desire to do so. Days when many startups can get away with a lot of money without giving away equity or other form of established guarantees are coming to an end, shrinking that market to its viable size. Only projects having a working MVP (at least) and a very solid team with a strong business case can now get funding this way.
However, as Neufund’s completion of its Equity Token Offering last week shows, STOs are coming to step in and provide a genuine, legally sound, long term fundraising method for startups. Many other Security Token platforms will launch in 2019, and most of ICO market will move there, hungry for investors who are no longer willing to settle just for utility tokens. They will give away equity, a good old fashioned way to attract investor, use the proceeds to build their products, and then launch the ICO when they want to attract actual users. This separation of investment and product (utility) will be the key for a much more mature, stable ICO market. As soon as we hear that Exchanges are receiving licenses to trade Security Tokens (be it Equity, Debt or Asset based), we will see the Crypto Spring. Until then, make sure to wear warm clothes and stay mostly indoors!