Since bitcoin came into existence over ten years ago, many other cryptocurrencies have failed after their launch. Mostly, they come in the form of great fanfare and celebration, only to fail and fade away as investors and the general public move away from them. By November 9, 2020, at least 1,730 cryptocurrencies have failed, according to Coinopsy which tracks such failures.
That is a significantly large number of dead coins, even when compared to the 7,616 cryptocurrencies that have been in existence so far. Many analysts and experts believe that many more cryptocurrencies have failed but are yet to be recorded. They also say that a considerable number of coins that are currently active might fail in the future.
Why do so many crypto projects implode? It is expected that many initiatives will come and go in a nascent market. In that context, the 1990s dotcom bubble is the ideal example. Concurrently, the crypto developers do not spend enough time designing a business use-case for their tokens and coins. They only realize after launch that the idea that enabled them to develop their coin is yesterday’s news.
In several cases, there have been launches that plagiarize previously successful coins. For instance, you hear some saying that “coin x is the new Bitcoin”. Yet, the current crypto market has bitcoin and it is still in high demand. Many seem to ignore this issue with developers although they criticize regulators for failing to keep up with the fast revolution taking place in the crypto market.
Cryptocurrencies have failed at an alarming rate which resulted in the US regulator the SEC developing the Howey Coin. That was a fake new coin offering designed perfectly to teach the investors about the various risks involved in putting money into crypto. These types of developer errors will continue. Here are some of the factors that may result in future crypto failures:
Big Finance Arrives Where Cryptocurrencies Have Failed
In 2009, Satoshi Nakamoto revolutionized money with the release of their white paper that outlined Bitcoin. Other developers and leftfield entrepreneurs followed suit and released various tokens and altcoin into the nascent sector. The early developers wanted to bring the central banks and traditional financial systems down using decentralized units of exchange.
Barely a decade later, the ‘bank killers’ are getting assimilated by the big financial systems and institutions that they originally sought to challenge. Today, Wall Street is continuously taking charge of the crypto arena. In the process, it is professionalizing trading using derivatives and futures products.
There is a possibility that the next phase of the crypto market will favor large institutions that will generate profits from the crypto design. Eventually, investors will be convinced that cryptocurrencies have failed to take over the global economic industry. Hence, it appears like the next revolutionary project in the crypto world will be generated by a multi-billion-dollar company; an entirely ironic turn of events.
Therefore, most of the other crypto projects from owners that do not have deep pockets may fail in the future. They will be inspired by minimal fees and the dream to dominate the future of money but that alone will not be enough.
The Future Is In Stablecoins
For crypto to succeed, there must be a reason why people would want to use it, and they must trust it. People trust a coin or token based on the underlying blockchain technology. Hence, it is highly likely that the market will always judge a new launch based on its use case.
Currently, different types of altcoins exist, offering many things, including ways to fund web advertising and units of exchange in the gaming world. But most recently, the market’s attention has gradually shifted towards stablecoins. By description, stablecoins are cryptos designed to avoid the volatility that exists in the industry.
Stablecoins are designed to encourage investors to use crypto for their daily transactions while giving them a stable store of value for traders on different cryptocurrency exchanges that do not deal in fiat currencies. Examples include Tether and USD Coin, which are equivalent to $1.
Also, the fact that it takes a lot of financial resources to make the coins operational might favor large institutions. Cryptocurrencies have failed in the past. Hence, developers are encouraged to learn from them to ensure that their projects succeed.