While 2017 was the heyday for the entire crypto industry, in 2018 things turned a little darker.
Falling prices, fears around crypto regulation, lackluster institutional interest, and concerns over the ICO funding model which had run rampant in the previous year, all combined into the perfect storm of crypto doom and gloom.
While much focus is placed on token prices as a barometer of the heath of crypto, a new industry analysis has found the number of blockchain startups in the sector declined precipitously last year.
Novum Insights—which monitors around 9,000 companies in the blockchain and crypto sectors by tracking token trading as well as “signs of life” activity on websites, social accounts and GitHub pages—found over 1,811 companies, or 20% of its sample, stopped showing any such signs in 2018, and many simply vanished entirely.
Reasons for the failures identified by Novum range from outright scams and Ponzi schemes where project creators simply vanished, to the more mundane business reasons of poor capital management, business model failures and shifting regulations.
“A large number of companies were shut down in 2018 after India and China’s announcements of considering cryptocurrencies illegal on their soil,” added Novum’s CEO and founder Toby Lewis.
The failures in Novum’s sample also affected some verticals more than others, with failures affecting more than 30% of crypto companies working in the manufacturing sector, and more than 20% of companies in the entertainment, logistics and agriculture sectors.
The most promising vertical for crypto and blockchain in 2018 was education and academia where slightly over 10% of companies failed.
Despite the downturn, a total of 1,065 new ICOs raised about $21 billion for crypto and blockchain startups last year, although this figure was skewed towards Q1 and Q2 when crypto prices were between 80% and 90% higher.
Novum’s sample of crypto companies—which isn’t necessarily representative of the wider sector—suggests a contraction of business activity in the blockchain and crypto sectors during 2018, given the high level of failures and lower numbers of companies raising capital.
Time will tell if 2019 shows any better signs of life.
-Oliver Smith Forbes Staff