The main event of recent months is the collapse of one of the largest cryptocurrency exchanges - FTX. This event will have far-reaching consequences due to the strong influence of FTX and Alameda on the entire industry.
A drop in confidence in the crypto asset market
A serious decline in trust in the crypto asset market is expected, leading to the following trends:
- Significant outflow of funds managed by cryptocurrency funds;
- It will become significantly harder for crypto funds to attract financing in the future;
- Decentralized projects will be given priority in venture financing from now on;
- A series of bankruptcies of crypto funds and companies associated with FTX is possible in the foreseeable future (for example, according to various sources, from 25% to 40% of cryptocurrency hedge funds are directly linked to the exchange and/or its FTT token);
- Cryptocurrency startup valuations will decline.
Based on everything mentioned above, it can be concluded that the venture industry will continue to decline, despite the fact that it has already cooled significantly due to overall market uncertainty. In 2021, $23.3 billion was raised, while total investments for the last 10 months amounted to $12.8 billion.
For crypto hedge funds, the coldest days in history are beginning now. Before the FTX crash, they represented the fastest-growing sub-industry of hedge funds, outpacing Bitcoin and other cryptocurrencies, and some of them even made it to the list of the most successful funds worldwide.
The fall of the token sale market
Token sales were the main crypto trend of 2018 and attracted over $21 billion in funding.
In 2019, the market crashed to $3.3 billion, after which its dynamics became directly dependent on the current state of the entire crypto market, as well as the venture financing industry of crypto projects.
In 2017-2018, over 90% of token sales were ICOs, but it was later revealed that from 60% to 80% of offerings were fraudulent.
Therefore, in 2019, ICOs were replaced by IEOs, which significantly minimized the risk of investor fraud, thanks to the fact that a centralized exchange acts as the organizer, taking on certain obligations.
However, the DeFi boom in 2020 spurred the development of IDO token sales, held on decentralized exchanges, as a result of which IDOs now account for more than half of the market volume, confirming the general trend towards decentralization. In addition, the dynamics of IDO token sales volumes differ somewhat from those of IEOs and ICOs, which indicates a certain degree of independence of IDOs.
The profitability of token sales conducted in late 2022 and the first three months of 2023 is also not good – out of 493 offerings, only 56 projects demonstrated a positive ROI. And the profitability of 277 token sales does not even reach 0.1x.
The average profitability is about 0.65x.
