- ICO fundraising in 2020 dropped by a staggering $20.6 billion from 2018
- Crypto ICOs received just $95 million in funding, the lowest since 2015
- Increased retrospective action from regulators plus a lack of clarity causes many to stay away
ICOs raised just $95 million in 2020, the lowest total since 2015, in a sign that the crypto world has matured from the fundraising method that has ushered in two years of retrospective regulatory action. ICOs raised a whopping $21.62 billion in 2018 in the aftermath of the 2017 crypto boom, where flipping them for quick profits was a major part of the moneymaking process for those involved. There are however a number of reasons why ICO investment has decreased in the two years following this explosion, while the picture for 2021 looks equally bleak.
Funds raised via ICOs:
2014: $30M
2015: $9M
2016: $257M
2017: $6,558M
2018: $21,621M
2019: $3,255M
2020: $95M(Almost all of the ICO stats sites are offline; 2020 number could be a bit higher.)
— Jameson Lopp (@lopp) December 25, 2020
Fear of Retroactive Punishment Keeping Creators Away
There are two key reasons why ICO raises have capitulated in 2020, the first of which is fear of prosecution. The Securities and Exchange Commission has spent the years since the crypto boom hauling crypto project founders over the coals for ICOs that contravened securities laws, some of which ended in fines and some of which ended in prison sentences.
This increased oversight has scared off both genuine blockchain project creators and would-be crooks from launching ICOs in equal measure, with those at both ends of the spectrum scared of falling foul of the authorities, intentionally or otherwise.
Lack of Framework Damaging Blockchain Space
Another reason why ICO raises are down, which is related to the regulatory aspect, is the lack of framework for such endeavors. Following the 2017 crypto boom, many in the space expected that by 2021 there would at least be a basic framework in place for running a blockchain or cryptocurrency ICO, but sadly this is still not the case.
This lack of a framework has put off many genuine blockchain entrepreneurs who have either given up or gone to great lengths to ensure that certain countries cannot participate in the token sales to avoid potential prosecution.
Worse to Come for the ICO Market?
The downward trend for ICOs looks set to continue into 2021. IEOs have overtaken ICOs as the preferred ‘traditional’ form of token sale, while many have turned to private investment to avoid the legal ramifications. Even if the SEC comes out with a guide to help potential blockchain clarify their position, the ICO horse has bolted, with projects moving to various other ways of raising funds.
Were such an eventuality to arrive we may see an increase in fundraising, but nothing like the levels seen in previous years.
