Return to Sustainability for Crypto Markets

By Kenneth Lee

The insane ICO boom in from late-2017 to mid-2018 was never sustainable for the cryptocurrency markets.

During this period, ICOs have evolved to become get-rich-quick schemes where investors would buy into the most hyped up ICO projects in hopes flipping it onto other market participants to make a nifty profit of 5-10 times their original investment within a short period of time. Trouble was, that most participants do not realize that the rate that ICOs were raising funds was unsustainable.

(Source: https://www.icodata.io/)

How ICO fundraising had evolved…

When the ICO hype first took off in September 2017, it was feasible for individual retail investors to participate in these hyped ICOs through crowd sales, which formed a majority of the token sale. As time evolved, large volume investors were getting better deal terms which gave rise to the creation of pools who would bargain on the behalf of their investors. In view of the overwhelming demand for the best ICOs where they can be oversubscribed for multiples of their targeted hardcap, ICOs quickly realized that they were in a seller’s market and can use allocation to bargain for additional services (e.g. marketing, exchange listing, business partnerships).

Unsustainable rate of fundraising…

The fundamental problem with ICO fundraising was that every dollar contributed into an ICO project represented a dollar of withdrawal from the total coin market capitalization.

Hence, it was unsurprising that we saw a continuous decrease in the total coin market capitalization since Jan 2018. The rate of fresh capital inflow into crypto assets could not keep up with the rate of withdrawals.

Going forward

We’re now at a stage of extreme pessimism where market participants are convinced that crypto assets prices are generally doomed to continue falling over time. Yet I remain optimistic that cryptocurrencies are here to stay given the incredible innovation potential they have. Cryptocurrencies also offer independence from centrally controlled national currencies and offer the opportunities to create microeconomies given the right tokenomics.

In the next few months, possibly years, we will continue to see a consolidation of capital into quality assets with projects that have proven capabilities to execute on their business expansion and technology development. There are some projects which have gone into a zombie-like state, where their social media channels are still active, but technology and business development has ceased as founders have either spent all the money raised or have decided to pocket the ICO money for themselves.

High-quality assets such as Bitcoin will continue to exist and will eventually make new highs, exceeding that achieved in Jan 2018. However, the tokens which will deliver the largest returns (more than 100x) when the new bull market returns are projects with small market capitalization BUT have teams that are actively working on their platform and have a sustainable strategy to survive the downturn.

That is what we are doing at EdenChain. In our most recent update on our vision and strategy (https://medium.com/edenchain-io/updated-vision-and-strategy-oct2018-f242688805f7), we have carefully analyzed how the markets are evolving and adapted our strategy accordingly to ensure that EdenChain has the best chances of succeeding in the long run and provide that outsized returns that long-term investors are looking for.

We can’t guarantee success, but what we can assure you is that the EdenChain team are working hard to deliver on the vision for a programmable economy in the future.