The Cryptocurrency Graveyard

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by Peter Schiff, Schiff Gold:

It’s no secret that Bitcoin has tumbled since its meteoric rise late last year. After nearly touching the $20,000 mark, the cryptocurrency is trading at around $6,600 today. Other cryptocurrencies such as Litecoin, Ripple and Ethereum have also all shed big chunks of their value. But at least these cryptocurrencies are still alive and kicking. Hundreds have simply died.

Deadcoins.com lists over 800 cryptocurrencies that no longer exist or have a value of 1 cent or less.

As an article in Forbes points out, many of the dead coins came from failed projects that used initial coin offerings (ICOs) to raise funds. As the startups collapsed, the cryptocurrencies they issued became worthless. But failed ICOs weren’t the only source of the coin corpses now resting peacefully in the crypto graveyard. Many of the dead cryptocurrencies were scams from the get-go. Some were killed by hackers and some were never anything more than clever parodies.

“There has obviously been a lot of fraud and hype in the ICO market,” Aaron Brown, a business author and investor who writes for Bloomberg Prophets, said in an email to Forbes. “I accept figures I have seen that 80%of ICOs were frauds, and 10% lacked substance and failed shortly after raising money. Most of the remaining 10% will probably fail as well.”

According to CoinSchedule, ICOs have raised $11.75 billion in 2018 alone. But an analysis published by an ICO advisory firm reveals less than 4% of ICOs raising from $50 million to $100 million were successful or promising. As Forbes put it, “Most ICOs were raising money without having an experienced development team or an actual product, just white papers studded with promises.” Analysts say blockchain startups are faring worse than counterparts in other industries.

Of course, this should come as no surprise. We see similar busts with the advent of every new technology. It takes a lot of failure to generate every success. Think of all the fly-by-night internet companies that came and went during the dot.com bubble. Investors poured billions of dollars into plans for websites that never even went live.

Outright scams have also plagued the crypto world. Last spring, The Wall Street Journal revealed that investors forked out some $1 billion on ICOs that were full of “red flags.”  The WSJ identified 271 fraudulent coin offerings with red flags including “plagiarized investor documents, promises of guaranteed returns and missing or fake executive teams.”

Then there are the parodies. Names like BUTT-Coin, Useless Ethereum Token and JesusCoin should have been giveaways that these weren’t real cryptos, but that didn’t stop some hapless investors from slapping down a few bucks.

Crypto apologists will point out that while the dot-com graveyard is every bit as full as the crypto cemetery, we still ended up with Facebook, Amazon and Google. So, maybe we shouldn’t judge the living by the dead.

Regardless of whether you are bullish or bearish on the long-term prospects for cryptocurrencies, the crypto graveyard should serve as a warning sign and give investors pause. Does this mean you should abandon Bitcoin and other cryptocurrencies completely? That’s a decision every investor needs to grapple with.

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