Research Firm says ICOs aren't selling their war-chests
Apparently all the selling in the crypto markets is not being caused by the ICO boom of 2017.
There was rampant speculation that the recent slide in 2018 was caused at least partly by all the ICOs from 2017 and early 2018.
The thought was that they had been selling all the funds raised in order to protect what little value they had left as prices continue to slide lower and lower just about every week.
That way they at least have some capital to build out their projects.
Backstory:
ICOs saw record inflows in 2017 and then again in 2018 and the vast majority of those inflows were priced in Ether.
The theory was that bitcoin was sold for ether by investors in order to invest in ICO projects.
The Ether collected by the ICOs was then held for a bit as prices continued to climb and climb, giving projects even more capital to develop their projects with.
However, at some point that Ether would need to be converted into fiat in order to fund development.
The theory was that was a big part of the selling we are experiencing recently.
However, research firm Diar says not so fast.
According to the research Diar compiled, ICOs are still holding roughly 40% of the funds they raised via ICOs:
(Source: https://www.ccn.com/icos-arent-cashing-out-their-cryptocurrency-warchests-yet-research/)
Yikes!
So, if they are still holding 40% of the funds raised initially what does that mean going forward?
If you are an investor in Ether, it likely doesn't mean anything good.
You see, those funds are going to have to be sold at some point to develop those projects. Which means that 40% represents unsold Ether that is likely to weigh on prices for many months to come.
It also means that the selling we are seeing is not likely coming from ICOs but other sources.
First it was tax related selling, then it was ICO related selling, now it is looking like much of the selling is just from whales that found themselves holding lots of bitcoin valued 10x-100x more than where they mined/received them.
The head analyst at Diar, Larry Cermak, had this to say about the findings:
“Obviously, a lot of the ICO companies will continue selling ETH to cover operating expenses and to fund their businesses. It’s important to realize that the majority of these projects isn’t generating any revenue. And most likely never will. This in turn creates ETH selling pressures, which are unlikely to go away any time soon. The price is affected not only by the ETH mining issuance but also by ICO companies liquidating to cover their expenses.”
(Source: https://www.ccn.com/icos-arent-cashing-out-their-cryptocurrency-warchests-yet-research/)
The worst not over?
Unfortunately it looks like there may be more selling to come for Ether holders.
Will this affect the rest of the markets? Not likely, but it does represent significant supply remaining.
In the case with Ether, what goes up, must come down.
A big part of the reason Ether ran so much in the first place was due to the ICO craze of 2017.
Stay informed my friends.
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Follow me: @jrcornel
It's ironic because ETH is the main reason I made any profit in crypto, I bought some on a whim when it was $13. Barely paid attention to crypto for months but then noticed it had pumped insanely over $300.
Used that to start buying STEEM and altcoins at their peak in Spring 2017. The whole time I couldn't believe how high ETH was valued. It seemed insanely overestimated. So it doesn't surprise me it's dumping, what surprises me is how long it took to do so.
Many of the altcoins have fallen to test their early 2017 support levels and even gone below that in some cases. In my view it's not out of the question for ETH to fall much more from here.
Agreed. The question then becomes do the rest follow suit? Are prices destined to return to pre Spring 2017 levels. If that is the case, we might see steem sub $.10 again. Ouch that would not be fun..,
Oh man, who even knows at this point. I've seen a few traders state that the next significant support level for STEEM below this point is around $0.30. If we really revisited $0.10.... 😧 It would be majorly painful. :-(
There should be some support around $.50 as well. Also where we are currently is close to the previous support. I don't fully agree with the notion of no support till about $.30, though I will secede that there isn't really strong support. Though, we should have had strong support around a $1 and we knifed through that like nothing, so perhaps support doesn't mean much in our current environment.
Yeah, I agree, I would be surprised if it fell immediately to $0.30. One thing that's so brutal in the bear market is the trading volume being so low. I wonder if we'll touch one of those lower supports and then see some bullish action with the release of the Velocity Hard Fork?
I'm not worried about Steem as long as I have BTC on Bittrex... Nice exchange otherwise, but deposit limits and withdrawal fees are ridiculous... I've been hoarding Steem since HitBTC closed its wallets.
You think steem will be fine longer term?
Lower the value falls, more people will buy Steem, because they know it has potential to climb up very high. As long as it doesn't fall below the value people are still willing to sell, there is no reason for panic.
Excellent analysis @jcornel 🧐🧐🧐
Prices r sliding so at least companies want to get profit or recover their cost.Do you think we are in the loss too
@jrcornel
Not sure. We may have further to go still. We need real world use cases for these things if they are to hold any kind of value. We got a free pass for the last 18 months due to speculators. That phase appears to be over.
The threat of ICO's selling all their ETH, and the risk that poses to the short term price of Ethereum, is very much akin to the Mt. Gox lawyer liquidating BTC...
Sucks to me a hodler at the moment, but our time will come.
Hopefully.
It's kind of scary thinking of all these projects as ticking time bombs. Eventually, they have to sell and the market might just freak if they do. If they've held this long though, they'll probably hold a lot longer. We have that to look forward to in the coming years.
I wonder how many of those that have sold large amounts they mined long ago are actually going to end up buying more at a lower point. If they do, we might see it seriously moon as they all try to rush to buy back in, eventually.
My guess is they probably have some number that is their absolute must sell by, I don't think we are there yet. Though when we get there everyone will sell at once and it wont' be pretty.
They do tend to sell and buy all at once somehow...maybe it's just some tendency for semi-randomness to coalesce, or they check the markets and set according to where a mass of sells or buys are set, or they use some kind of bot.
I don't think we have to worry too much about them selling at this low though. They likely will sell at some peak in recovery. Well...some of them will sell a certain amount...and then some of them will buy in lower... That's part of why we have hills and such in prices. It's not just people taking profit, but certain people trying to get some capital, and some people trying to minimize loss, worried that it might go lower.
Many of them are likely trying to minimize costs right now, and perhaps some of them have actually increased their holdings, or will, with fiat that they liquidated at a higher price for operating expenses.
I can only dream of having a corporation's resources to buy and sell crypto. I imagine that in the future, rather than many companies avoiding crypto due to it's volatility, some might feel like they can't ignore it because of that same volatility. It's rather a big deal with you can get even 10% increase of profits, let alone something like 100%. The risk might eventually be worth the reward.
If prices keep sliding they may be forced to sell at a low price to preserve whatever capital they have left in order to launch their project.
I'm willing to hold on w/my cold storage wallets below 3k if the outlook is not cataclysmic. But as for trading, I'd freak if it's a steep price drop, which I bet it would be when it touches 3k.
I agree completely either has a shaky future best!
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Anything that runs from under a dollar to over $1000 in a year needs to retrace... a lot.
I just spent the whole day trying to convince my friend holding his ETH isn’t a great idea but he would rather risk it with the low price, it can’t drop much lower he thinks..... how psychology plays into the trade markets, at least he dropped his random eth tokens already
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I think we will go back April 2017 levels for all coins soon and then we slowly climb up as real adoption happens
That will be pretty painful but very possible.
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Quite interesting to see indeed. I think that means that the fall in price has been due to the lack of demand for ETH has the ICO market has dried up due to the bear market and some regulatory concerns. However, this does raise a point in that many projects will also fail given that funding may fall short of needs to develop and deploy their protocols.
Yep exactly. It's a double edged sword. Cuts two different directions.