Have initial coin offerings (ICOs) cashed out their Ethereum tokens (CRYPTO: ETH) in order to realize gains from last December and avoid this year's bear market? You might think so but guess again. A lot of ICOs still have plenty of Ethereum on their balance sheets, according to research by crypto newsletter Diar.
At current price of $192, Ethereum has lost 86% of its value from its $1,400 peak in January. That's a pretty steep decline.
On Monday Larry Cermak, head analyst at Diar, tweeted "There is a big misconception that ICO companies have liquidated most of their ETH holdings." He adds "On average, all of these projects have moved or liquidated 62% of the amount that they initially raised. In other words, they are still holding 38% of the initially raised amounts."
And those are huge amounts on the ICOs treasuries considering these ventures, most of which don't have a working product or prototype, raised $6.3 billion in 2017 according to CoinDesk study. In a Sept. 10 tweet, Cermak said all ICO treasuries have 3.74 million in ETH or 3.7% of the total Ethereum supply. At $192 that amounts to nearly $720 million.
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Ventures with the biggest balances are DigixDAO ($75.3 million), Golem ($70.3 million), Status ($46.9 million), Aragon ($45.2 million), FileCoin ($41.3 million), Tezos ($38.7 million) and SingularDTV ($38.3 million). These large Ethereum balances will likely create selling/downward pressure on ETH's price for years to come as blockchain firms liquidate their crypto assets to pay bills and meet investor obligations.
That's because most ICOs aren't generating any revenue and most never will. Thus, it's reasonable to presume that there will be constant liquidity events as these firms sell Ethereum to obtain cash.
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"This in turn creates ETH selling pressures, which are unlikely to go away any time soon," said Cermak on Twitter. "The price is affected not only by the ETH mining issuance but also by ICO companies liquidating to cover their expenses."
"At least 12 ICOs currently have a smaller market caps than the amount that they hold in their ETH treasuries alone - Aragon, SingularDTV, Gnosis, FirstBlood, Monetha, HEROcoin, Bloom, Mysterium, Atonomi, Indorse, Musiconomi and Aventus," said Cermak. "Seven companies hold more than 200k ETH (not counting Poladot, which has funds stuck in the Parity bug) -DigixDAO, Golem, Status, Aragon, Filecoin, Tezos and SingularDTV."
On Sept. 8, Ethereum founder Vitalik Buterin told Bloomberg that the days of massive gains
in crypto prices are likely over. "The blockchain space is getting to the point where there’s a ceiling in sight," said Buterin. "If you talk to the average educated person at this point, they probably have heard of blockchain at least once. There isn’t an opportunity for yet another 1,000-times growth in anything in the space anymore."
At $187 Ethereum has a market capitalization of nearly $19 billion. Twenty-four-hour trading volume stood at $1.6 billion as ETH lost 5% in the past day. There are 101.8 million ETH tokens in circulation. Bitcoin's dominance (CRYPTO: BTC) of crypto market is 56%.
"Mr. Buterin voiced his belief that the decentralized industry must begin to move into the direction of real application of real economic activity," wrote Diar's analysts on Sept. 10. "It seems, however, that with scaling issues that continue to be of concern, marketing activities promoting the potential could remain the norm."
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Disclaimer: The views expressed in this article belong solely to the author. Information contained herein should not be construed as investment advice.