Low Survival Rates Among Crypto Start-Ups

Researchers from Boston University reported recently that more than half of crypto-related projects last less than 120 days. The low survival rate is a big concern for many investors and business owners. Two researchers from the university sampled more than one thousand cryptocurrency accounts in Twitter. They discovered that for each 1 percent increase in users, the market capitalization increase by 1.2 percent, which represents increased return for users. The use the volume of tweets among Twitter accounts to estimate the survival rate and about 44.2 percent survived after 120 days.

Worse, after the fifth month, the survival rate further dropped to only 17 percent. They concluded that the robustness of an ICO is determined whether a company is listed on an exchange. When a crypto-company does list, investors who tipped money in an ICO stage will reap the best possible returns. These researchers also found that crypto start-ups can generate 179 percent of average return for ICO investors. Many ICOs easily skyrocket after listing due to inherent under-pricing when ICO investors purchase based on the opening market price. This is understandable; because during normal IPO, it’s also difficult determine the proper listing price.

In general, ICOs are much smaller than regular IPOs. Many start-ups with ICOs don’t have an underwriter, who is an external party, including investment banks. Underwriters can determine values more accurately to attract buyers. Researchers from Boston University also concluded that returns for ICO investors are declining. Firms are taking a lesson from previous offerings about current market demand and the use of various platforms. Investors who plan to participate in ICOs need to perform enough researches, to make sure that the company will survive for not only months, but also many years to come. It is better to obtain reasonable long-term income, than trusting promise for quick returns.

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