Crypto startups could go bust in 2019

Many crypto companies will struggle to survive 2019, according to industry observers, after collapsing prices in 2018 depleted the reserves needed to fund their businesses.

Companies in the space are already laying off workers, shutting down operations, and scaling back plans in the face of significant headwinds.

“I think you definitely will see companies go bust,” said Anthony Maguire, a former Facebook employee who now runs a blockchain advisory and education business focused on emerging markets. “Tech startups go bust all the time. Sometimes they get swept under the rug in the sense that people just forget about them.”

Cryptocurrencies exploded in popularity in 2017, largely thanks to two factors: bitcoin’s price and the explosion of ‘initial coin offerings’.

The price of bitcoin (BTC-USD) rose throughout 2017 and this attracted more and more investors to the market, most of whom hoped to make a fortune from the price rise. By December 2017, bitcoin was worth close to $20,000.

Meanwhile, “initial coin offerings” or ICOs exploded. This innovation was where startups issued their own digital tokens, structured a little like bitcoin, to fund their business. Most startups sold their tokens in exchange for ethereum, the second biggest digital currency. By the end of 2017, there were over 1,000 crypto tokens in circulation.

However, the crypto hype has unravelled this year.

Bitcoin’s price slid throughout 2018 and it now trades around $3,800. The market collapsed when the supply of new investors hoping to make money dried up. Without the speculators, those owning bitcoin found there was little demand or use for it.

At the same time, the prices of most ICO tokens have also collapsed as the projects have failed to deliver on their often lofty promises.

“We’ve got a 90% s***coin marketplace, where people have then lost money because the realisation has been there is no utility,” Edd Carlton, the head of OTC trading at BlockEx, told Yahoo Finance UK.

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