Every day, a number of crypto projects flood the market. A few of them manage to rise to find a place for themselves in this constantly moving ecosystem. But the truth is that most never break through and end up disappearing as quickly as they emerged. This is, to say the least, what a recent study by CoinGecko shows. She says that in recent years, cryptos have experienced explosive growth which has led to thousands of new projects flooding the market. The problem is that a large part does not survive the dynamics of the sector. How is this explained? This is what we will see together in this article.
14,039 crypto projects have disappeared from the ecosystem since 2014
From 2014 to today, CoinGecko has particularly followed the emergence of new crypto projects. Some 24,000 crypto initiatives have emerged over this period. But despite this sustained flowering of new crypto projects, the platform makes an observation. At least 50% of these crypto initiatives are no longer operational. In any case, this is what observing the dynamics of these assets over the last 30 days shows. From an accounting point of view, approximately 14,039 projects vanished into thin air. This, leaving behind a trail of unsuccessful crypto companies. A clear sign of the particular ferocity of competition in this sector.
What is particularly notable is that the majority of these failed crypto projects appeared during the intense 2020-2021 bull cycle. During this period, a staggering 7,530 launched cryptos bit the dust. Which represents 53.6% of all failed projects as listed by CoinGecko. The scale of the numbers becomes poignant when we consider that more than 11,000 cryptos were listed during this bullish phase. Which translates to a staggering 70% failure rate.
The reality of these figures is also observed for crypto projects launched during the 2017-2018 bullish period. At least 1,450 of the 3,000 crypto initiatives deployed during this period also failed. A negative performance similar to that achieved during the bullish phase of 2020-2021. It therefore seems to be constant that the majority of cryptos placed on the market do not survive the harsh reality of the fierce competition that prevails in this ecosystem. The question is why this is so.
Why such a massacre?
According to some analysts, 15 months is enough for most cryptos launched in a given period to no longer exist. Otherwise, the lifespan of a large majority of crypto projects is less than a year and a half! Several reasons can explain this state of affairs. Some of these causes are intrinsic, while others are extrinsic.
The extrinsic causes of the collapse of most crypto projects
If the majority of these crypto initiatives die out quickly, this is primarily due to the fierce competition that reigns within the sector. Indeed, there are a multitude of initiatives offering similar products and services. This creates an extremely competitive environment in which newcomers cannot establish themselves without finding a way to stand out. Which is obviously extremely difficult.
The second extrinsic cause of the collapse of crypto projects is linked to frequent market jolts. A major challenge consisting of substantial market fluctuations in response to news and investor sentiment that very few initiatives manage to manage. Because, it should be noted, these variations can jeopardize the stability of crypto projects, particularly those dependent on fundraising to ensure their growth.
To these two causes of death for crypto projects, we must add regulations, still under development in many countries. This is a major obstacle to the development of crypto initiatives. Especially since the absence of a specific regulatory framework for cryptos can make fundraising difficult, thus hindering their progress.
It should be noted that if these extrinsic causes greatly hinder the development of these crypto projects, they could otherwise limit the damage. This, by better controlling the intrinsic causes of their failures.
The intrinsic causes of the death of the majority of crypto projects
The first intrinsic cause of death of crypto initiatives lies in the absence of a clear and viable economic model. Many projects are based on particularly innovative ideas. But their inability to develop a solid business model compromises their ability to generate sustainable revenue. While the longevity of a crypto project often relies on its ability to fit into a relevant economic model.
Another determining aspect in the survival of crypto projects: the presence of an experienced team. Indeed, the development of these projects requires advanced technical skills and solid experience in project management. However, many projects are managed by teams of amateurs who lack the necessary skills to carry out their initiatives. A situation that leads to insurmountable obstacles.
Finally, we realize that the sustainability of crypto projects requires the harmonious conjunction of the elements mentioned so far. Namely, a robust economic model, an experienced team, an ability to face competition, resilience in the face of market fluctuations. This, without forgetting effective adaptation to the sustained evolution of crypto market regulations.
With the explosive growth of the crypto market, thousands of projects have emerged. But CoinGecko’s study reveals that more than half of these initiatives (14,039 out of 24,000 since 2014) have disappeared. The bullish period of 2020-2021 was particularly devastating with 53.6% of projects failing. This situation is, among other things, due to several factors, including fierce competition, market fluctuations and developing regulatory standards. To survive this trend, new crypto projects must master these elements. A mastery without which they are doomed to suffer the same fate.
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