Genuine Blockchain-based startups with potential will do well in the long term despite the reducing value of top cryptocurrencies especially ETH-based ERC20 tokens which are mostly used during Initial Coin Offerings.
The projected cap for startups running crowdsales currently – or those that are about to start – have been affected by the fear and panic permeating the entire crypto space since the news of a pending scalability issue that is threatening to split the top currency Bitcoin into two.
“Most ICOs need funding because they need to spend fiat money”
Normally, all new startups that have raised funds through ICOs need cash at some point thus having the need to sell into the market. Some other reasons such as the time it takes for these projects to spend capital on developing what they had promised and the recycling of investments into new ICOs by traders thus dumping older ones have contributed to the drop in the price of top currencies like ETH.
With the new lows looking to stay until the end of July when a split would have been confirmed, startups on the about-to-launch-an-ICO list do not seem perturbed by the situation as most of them have continued with their plans unhindered.
“It will affect how much overall money is invested in ICOs overall, so the good ones will still get funded but fewer bad ones,” says George Popescu of Lampix. “Unfortunately, most ICOs need funding because they need to spend fiat money. So, the need doesn’t change: an engineer’s salary is about the same regardless of the ETH exchange price.”
The co-founder of a would-be PayPal rival Monetha Justas Pikelis, shares a similar view that the situation is not likely to affect ICOs tremendously. Pikelis says:
“The price may rise and it may fall, but the strongest ICOs will still raise money because that is what is needed for the Ethereum economy to rise.”
Popescu is confident that Ethereum is up to the task saying to Cointelegraph:
“One should look at ETH being up 1800 percent and not down 50 percent as that is the real story here. Nobody believed that ETH will find steady state at the top value of course. But now that ETH price has stabilized, ICOs are likely the more reliable source to see a nice return on an investment into an early stage company.”
Diversifying ICO assets is important
Maximilian Power from Brickblock is of the view that volatility within crypto is not a recent problem, hence he hopes that all startups that have had an ICO diversified a certain percentage of their assets early enough to provide some form of a hedge against the volatility.
“Typically the volatility around gold is circa 1.2 percent and the volatility around BTC for 30 days is circa 3.19 percent and 60 days around 4.39 percent,” he says. “As we see a gradual trend upwards across investments into digital current, I also expect to see a lower volatility in the longer term – which is directly proportional to the upward trend and volume of overall global investment.”
“For ICOs which are about to start, the crash or market correction could in the short term be perceived as harmful since investments will decrease,” Power concludes. “Nevertheless, overall there is a constantly upward trend and the markets believe this recent correction is a very good and healthy development.”
Though the recent correction may deter some investors from both ICO and potentially Ethereum in the short term, the level of support for recent ICOs has certainly been beyond expectation and reasonable estimates. This has led to calls for a tightening of controls more so as some of the projects received unproportionate investments often without a promising product or a proven team.
This article was originally published on: CoinTelegraph on