More than 8K cryptocurrencies were listed on pricing site CoinGecko during the 2021 bull market, though over 3.3K of them, or nearly 40%, have since been deactivated and delisted amid one of the worst downturns the industry has ever seen.
That’s 2.5x higher than the amount of tokens listed in 2020 that ended up failing, aka “dead coins,” and 3.5x higher than the year-to-date figure, Julia Ng, who leads Growth Marketing at CoinGecko, wrote in a study published Nov. 29.
“During this period, many cryptocurrency projects, tokens and coins with little to no value or any immediate or discernible purpose were launched by various anonymous developers,” Ng pointed out. “Few were actually committed to their projects, which resulted in a high rate of failure, and thus their ultimate demise.”
The global crypto market cap stood at only $866.4B after peaking at around $3T in November 2021, according to CoinMarketCap data. The sharp decline in the value of cryptos in a short period of time doesn’t necessarily reflect any fundamental or structural change to the blockchain ecosystem took effect, just as the stock market’s performance doesn’t always reflect the health of the economy.
Bitcoin (BTC-USD), which is seen as a key gauge for the cryptoverse and broader risk tolerance, changed hands at $17.8K as of Wednesday afternoon, down substantially from its November 2021 all-time high of $68.9K. That’s a more than 70% peak-to-trough drop. Many major tokens mirrored BTC’s volatile path as seen in this chart.
Based on CoinGecko’s methodology, cryptos may be taken off the site due to a shortage in trading activity within the last two months. A token might also get removed if projects are revealed to be a scam, or if projects request to be deactivated.
“Excluding the anomaly year of 2021, an average of 947 cryptocurrencies listed are dead and end up failing in the last five years, between 2018 to 2022,” Ng noted.
Tony Saliba, CEO of crypto trading technology provider Liquid Mercury, cited previous crypto market cycles where an outsized number of projects launched tokens that ended up failing after a frenzy-fueled bull run.
“This pattern played out during the last cycle when many projects rode the tailwind of a strong bull market in 2017, creating the ICO-driven surge in altcoins, and many of these tokens dropped to zero in 2018 and 2019 when the prices of bitcoin, ether, etc. fell,” he told Seeking Alpha in an emailed statement.
“You need to have substance behind a product, a team that knows how to run a business, and more just to have a fighting chance as a startup, so the ebb and flow of token listings during market cycles will very likely persist into the future.”
Seeking Alpha contributor Anna Sokolidu flagged bitcoin as “highly volatile and unpredictable,” recommending conservative investors to look elsewhere in 2023. On the flip side, see why fellow SA contributor The Digital trend thinks Cathie Wood’s $1M bitcoin prediction “might be right.”