The following is a guest post from Cahill Puil, the founder of Byte Media Group, a strategic marketing consultancy helping blockchain and technology companies with branding, marketing, PR & community development.
Assessing the current 2018 cryptocurrency market seems like a bleak proposition. Since stratospheric market highs in December of 2017 – the market has slid into a serious decline, losing 50 per cent of its peak value and trading sideways for the better part of the quarter.
To add fuel to the fire, it is estimated that 46 per cent of ICOs that started in 2017…have failed already.
This does not include failing, or floundering ICOs, which will undoubtedly bring the total up. Correlating the ICO market to the underlying foundation of what it is – tech company crowdfunding – one only has to turn to the mature and established venture capital and angel investing markets to realize that the number will almost certain emerge in the 80-90 per cent failure rate.
If you’re investing or keeping an eye on the markets, here’s what you need to know about the remaining 54 per cent.
Pre-emptive self regulation
With regulatory bodies like the SEC divided, yet making moves against various platforms, companies, and ICOs it’s safe to say that of the remaining 54 per cent some will be actively removed by either platforms, or regulatory bodies.
While international trading platforms may not be affected, it would be wise to keep abreast of the regulatory bodies in the target country. As an example, the SEC in the Philippines has also warned that crypto related firms have violated their rules.
Understanding who of the remaining 54 per cent have taken pre-emptive self regulation seriously is going to be critical. An ICO who has aimed to satisfy the requirements for the regions they raised capital from, will fare far better than those who haven’t.
Smaller Is better
While massive growth and “valuation” of a cryptocurrency investment seems great on paper, the reality may be, just as is seen in mature venture capital or angel investing markets, that smaller is better.
As Jason Calacanis says “If you can’t finish the project without raising a ton of money, maybe you’re not actually a builder”.
Identifying the “builders” in the ICOs that remain will require in-depth assessment of what I call the 4-T’s: team, timing, tactics and traction. Naturally there are other aspects to assess to enhance your estimation of the ICO at hand.
Looking for smaller market cap ICOs with great marks in the 4 T’s may lead to increased potential success. This leads us to the next point.
What are the odds?
Let’s cut to the chase. We’re all looking for something to impact the world – and be the next “Bitcoin” in terms of wealth creation (or the next unicorn if you’re from Silicon Valley).
Finding one means heavily playing the odds – and being very comfortable with increased losses over 2018. As more of the 54 per cent mature over the next three quarters of 2018, there will be more failures.
And yet, if the odds are 1 in 50 that your target ICO can pull off the decentralized disruption it is aiming for, and your potential return is far higher than that – then perhaps you should consider the odds.
Naturally, data is the driver behind all investment decisions, and you’ll need to do your own assessment – but one thing is clear, the odds are it will get worse before it gets better.
Timing is everything
While the hype has founders and would be investors swooning with excitement, if one overlooked aspect from the history of businesses tells us – it’s that timing is everything.
Facebook was not the first social network.
Google was not the first search engine.
Apple did not make the first computer, nor the first cell phone.
The list goes on and on.
While it is often difficult to appreciate just how impactful timing is, it is critical would be investors look at the remaining 54 per cent with a timing eye. Is the timing right for decentralized X or Y? Are the right factors in place for aggregation theory, network theory or other related business concepts to help fuel adoption?
Understanding the impact of timing on the ICO in question will help you assess if there is a possibility of pulling off the idea.
In summary, the 2018 market will give savvy investors the opportunity to invest in great blockchain startups who have raised capital via ICOs. That said, the ICOs that are most likely to survive will have pre-emptively regulated their offering, are likely small in valuation and haven’t over raised and have great odds at accomplishing their goals because, their timing is just right.
May the odds ever be in your favor.