More than two-thirds of small-cap cryptocurrency tokens distributed through initial coin offerings (ICOs) are currently worth less than the startups that issued them raised through their crowdfunding sales, a newly-published report has found.

Small-Cap ICO Tokens are Hemorrhaging Value

According to the report, which was compiled by cryptocurrency research firm Diar, the 562 ICO tokens ranked outside of the 100 largest cryptocurrency market caps have collectively lost $5 billion in nominal value against what these sales raised for the funding teams, with 70 percent of individual tokens seeing losses.

Remarkably, that massive shortfall does not even include the value of the tokens reserved for the development team or otherwise not made available through the ICO, which in some cases would make that post-ICO performance appear even more dismal, depending on how many of those reserved tokens have entered circulation.

Equally as notable is that 324 tokens that collectively raised $2.3 billion have still yet to convince any one of the hundreds of cryptocurrency exchanges to list them on their platforms. Another 44 tokens that raised a combined $1 billion have been listed on at least one exchange but have virtually no trading volume, including one — Bankera – which raised $150 million.

Per the report, the worst-performing ICO token belongs to Sirin Labs (SRN), a startup developing a “blockchain phone” called the “Finney.” Since raising $158 million through its ICO, SRN has plunged by more than $141 million, a decline of more than 89 percent in just nine months.

Part of the reason for SRN’s poor performance may stem from unexpected competition in the blockchain phone market. As CCN.com reported, smartphone manufacturer HTC — who in its heyday produced nearly 10 percent of all smartphones globally — also plans to release a blockchain phone, dubbed the HTC Exodus.

Close behind Sirin Labs is PumaPay, which raised $117 million but is now worth just $15 million. Envion and Paragon each raised close to $100 million and now have market caps of just $4 million and $3 million, respectively.

ICOs Have Raised as Much as $20 Billion in 2018

Remarkably, slumping returns do not seem to be scaring away investors, even as overall consumer interest in cryptocurrency has reached a relative low-point. Estimates on ICO fundraising vary wildly, but CoinSchedule, which has recorded data from 789 token sales held this year, estimates that blockchain startups have collectively raised more than $20 billion in 2018.

Those particular figures may be somewhat generous — they take Venezuela’s claim that the state-backed petro cryptocurrency raised $735 million at face value, for instance — but, even so, they suggest that not even a bear market and increased regulatory enforcement can quell interest in this nascent fundraising model. If CoinSchedule’s data is even moderately accurate, ICOs have raised more than $1 billion in every month except August and July, a mark that token sales hit only twice in 2017 en route to a yearly total of $6.2 billion (The $4 billion EOS crowd sale began in 2017, but it is credited to 2018 since that is when the ICO concluded).

That said, even as ICOs have collectively raised an impressive sum in 2018, individual projects have often struggled to meet their fundraising targets. According to CoinSchedule, just 20 token issuers have exceeded their targets, while 402 — 51 percent — have raised less than half of their goal.

Investors Willing to Whiff in Search of Home Run

One likely explanation for the enduring popularity of ICOs is that investors are willing to place some bad bets on a variety of tokens in the hope that they will run the table on one or two projects.

Indeed, while ICOs ranked outside of the large-cap index have collectively posted dismal returns, those that have managed to crack their way into the list of the 15 largest cryptocurrencies by market cap have provided early investors with massive returns on investment (ROI).

For example, the sales for large-cap cryptocurrency tokens Cardano, IOTA, Tron, and NEO collectively raised $137.3 million. Even after shedding 80 percent or more from their all-time highs, these tokens have a combined valuation of nearly $6.4 billion, representing an ROI of more than 4,500 percent.

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