The inability of token issuers and product originators to forecast the value of acquired cryptocurrencies may be playing a significant role in a number of them failing to deliver on their promises.
Why ICO vendors are vanishing
Without making excuses for irresponsible players within the industry, it is still understandable that the high level of volatility in Bitcoin and altcoins is enough to destabilize a project.
In 2017, the Bitcoin/altcoin space has experienced swings that range over hundreds of dollars, and these swings happen over very short periods of time.
When the volume of cryptocurrency held is low, the gains or losses in value during volatile periods may appear negligible. However, with the amounts raised during most ICOs, the difference in capital when Bitcoins/altcoins drop in value is usually significant enough to alter the objectives of most startups.
Speculators are spoiling the market
The CEO of Never Stop Marketing, Jeremy Epstein, however, thinks that there is more to the recent changes than is popularly imagined. Epstein comments that the actions of speculators are ruining the ICO environment as they are not there for the appropriate purposes.
“I think there’s a larger issue here. It’s that most of these ICOs have tremendously benefited from the speculative fever. The thing is, speculators aren’t believers in the mission. They are opportunists. In a decentralized market, the single most important thing to have (as it’s critical to grow the network, value, and token itself) is a strong sense of community alignment within a growing community. That is a marketing challenge. It is knowing what your brand is and how to communicate it to the people most likely to care.”
Whatever may be behind the unexpected outcomes in the ICO space and the general crypto environment, one thing is certain - the cost of participating in most ICOs has increased substantially.
This is largely due to the high Bitcoin and Ethereum price, owing to the fact that most of the originating products are being built on top of the Ethereum Blockchain. Hence these tokens are mostly purchased using Ethereum.
Pairing tokens against fiat
Denominating the price of tokens in more stable fiat is an idea that some Blockchain solution companies are beginning to adopt in order to avoid the high level of uncertainty caused by Bitcoin/altcoin volatility.
While relaunching its token, innovative Blockchain-based cooperative banking-as-a-service enterprise, Moeda, has decided to price its tokens in US Dollars. In a recent press release, the company cites the soaring value of Ethereum as one of the reasons for its decision.
The announcement also states that Moeda will be accepting direct donations of Bitcoin and fiat currency for MDA tokens with assistance from Bitcoin Suisse AG, a regulated cryptocurrency financial broker, asset manager and service provider based in Zug, Switzerland.
Despite several other possible reasons, the soaring Bitcoin and Ethereum prices remain central in the decision making process for investors who are becoming reluctant to buying into ICOs. While the traditional medium of exchange remains a relatively stable fiat, pegging these tokens against fiat currencies may become a viable solution until the price fluctuation of cryptocurrencies stabilizes.