It was observed that the Terra and Cardano ecosystems experienced the highest rates of project failures. | Credit: Pixabay
Key Takeaways
- Over 14,000 cryptocurrencies have failed, with bull runs seeing the most casualties.
- Most failed projects debuted in 2021, highlighting challenges for new entrants.
- 2023 sees significant drop in failures, suggesting improved project quality.
Since its inception, the cryptocurrency market has seen a significant number of projects fail . Since 2014, over 24,000 cryptocurrencies have been listed, and of those, 65% have been deemed ‘dead’ or failed.
This high failure rate highlights the volatile and speculative nature of the cryptocurrency industry. It shows that a large proportion of projects are not viable in the long-term.
More Half of Cryptos Launched During 2020-2021 Bull Run are Deadcoins
In late 2022, the cryptocurrency market experienced a significant downturn . The market collapse meant 65% of all projects in the sector failed.
The period of 2020-2021, marked by a bull run in the cryptocurrency market, saw the most significant number of failures, with 7,530 cryptocurrencies launched during this time not surviving. This still happens and researches indicate that the majority of new cryptocurrencies ultimately fail, primarily due to declining trading volumes or complete abandonment by their communities.
AlphaQuest research highlighted 2023 as the most challenging year in the 2020-2023 period, with almost 60% of the cryptocurrencies that failed doing so within this timeframe. Overall, the study found that by 2023, 65% of cryptocurrency projects had ceased to exist, becoming so-called deadcoins.
Terra, Cardano Lead in Crypto Project Failures
It was observed that the Terra and Cardano ecosystems experienced the highest rates of project failures. To classify projects as deadcoins researchers used a set of criteria such as low trading volume and liquidity, inactive or deleted Twitter accounts, and websites that were no longer operational.
However, there is a significant outlier to this trend: the meme-based cryptocurrency Dogecoin (DOGE) has managed to defy the odds and maintain its presence in the market.This trend underscores the challenges and risks associated with cryptocurrency investments and the importance of due diligence and regulatory compliance for projects seeking longevity in this competitive space.
High Failure Rates of Cryptocurrencies: A Deep Dive into Bull Run Casualties
The cryptocurrency market witnessed a significant number of project failures, particularly from those launched in the 2020-2021 bull run. According to CoinGecko , 7,530 cryptocurrencies from this period have ceased operations, constituting 53.6% of all deadcoins on the platform. This surge in failures is part of a broader trend, where approximately 70% of more than 11,000 cryptocurrencies introduced during the last bull run have shut down.
Comparatively, the 2017-2018 bull run saw 1,450 out of over 3,000 listed projects closing, mirroring a similar failure rate. The marked increase in failed cryptocurrencies during 2020-2021 is largely due to the simplified process of creating tokens and the burgeoning popularity of memecoins. Many of these came out without a solid product foundation and were quickly abandoned.
2021 Marked as Bleakest Year for Crypto Launches
Cryptocurrencies that debuted back in 2021 have experienced the highest mortality rate, with 5,724 projects becoming deadcoins by January 2024. This figure represents more than 70% of the cryptocurrencies listed on CoinGecko . This meant 2021 was the most challenging year for new crypto projects.
Following closely, cryptocurrencies introduced in 2023 witnessed a significant failure rate as well, with 3,520 projects no longer active. This translates to a closure rate of approximately 60%.
The year 2023 saw a substantial reduction in the failure rate. Last year only 289, or under 10%, out of more than 4,000 listed cryptocurrencies failed. This drastic decrease suggests an improvement in the sustainability and quality of cryptocurrency projects launched in recent years.
Study Reveals Trends in Crypto Failures and Deactivation Reasons
In a study focusing on the lifecycle of cryptocurrencies , including both coins and tokens that were previously listed on CoinGecko and are now considered ‘deactivated’ or failed, an examination was conducted on listings from 2014 to the current year, 2023. This investigation, informed by a source who wishes to remain anonymous, aims to analyze failure rates over recent years.
Several factors contribute to the deactivation and subsequent removal of cryptocurrencies from CoinGecko, as outlined by the anonymous source. These factors range from a lack of trading activity for a continuous period of 30 days to the identification of projects as scams or ‘rug pulls,’ either through media reports or direct communication to CoinGecko from verified sources.
Additionally, projects themselves might request removal in cases where the team decides to disband, undergo a rebranding process, cease operations, or undertake significant token modifications that result in the original tokens becoming illiquid or obsolete, according to the standards set by CoinGecko.
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