The ICO industry continues to exist, although in a very depressed condition if we analyze how it was performing in 2017-2018. The ICO mania is over and now investors are fully aware blockchain-based startups carry a lot of downsides. Investing in a new company with a promising white paper had become a very hard decision after thousands of different entities failed to deliver on their investors’ expectations. In case you are not yet aware of why finding profitable ICOs is hard, here are just three of the reasons.
# Large-cap tokens dominate the market
Following the 2018 bear market, cryptocurrency investors had changed the way they allocate capital. After becoming aware of the risks involved when investing in altcoins, most of the big players had been focusing on large-cap tokens. As it can be easily noticed, Bitcoin, Ether, XRP, Litecoin, and some other important cryptocurrencies account for most of the global market cap. A new company can hardly compete with the reputation of these tokens, no matter how promising its project is.
# Increased competition among altcoins
Even if we move lower among small altcoins, there are more than 5,000 different cryptocurrencies currently in existence. Finding an innovative idea looks like the most difficult part and even in that case, there will some cryptocurrencies already having a similar purpose. People will always choose something that’s older because resisting the passing of time, means the company and its cryptocurrency can continue to exist and prosper.
Some might argue that for new ICOs, token valuations are very cheap. That might be the case in the short run since most of the altcoins had seen their price below the ICO value. Crypto market participants are most defensive and use crypto as a hedge, instead of taking huge risks, like they did two or three years ago.
# Lack of regulatory requirements
Although some countries had been successful in implementing regulatory requirements for new ICOs, while also cracking down on older companies that violated the law by raising funds via unregistered security offerings, the situation on a global scale is still far from being solved. To make the industry gain more trust, it would require regulations applicable globally. There’s still coordination with this respect, which leads to cryptocurrency safe-havens, or countries where blockchain-related companies can operate without any interference from the central government. Without regulation, the ICO industry will continue to remain subdued and few investors will be confident enough to take the risk with new startups.