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Cryptocurrency Graveyard: Two-Thirds of Crypto Projects Have Died, Analysis Reveals

Last Updated March 9, 2024 3:12 PM
Teuta Franjkovic
Last Updated March 9, 2024 3:12 PM
By Teuta Franjkovic
Verified by Peter Henn

Key Takeaways

  • A new report reveals that nearly two-thirds of all cryptocurrency projects have failed.
  • The average lifespan of a cryptocurrency project is only three years.
  • Experts recommend focusing on real-world utility, sound economic models, and strong communities.

Once a domain reserved for tech aficionados, the cryptocurrency sector has burgeoned into a vast, dynamic market that has reshaped the financial world throughout the 2010s and beyond.

This expansion has brought about significant opportunities but also complex challenges for investors and crypto projects alike.

Crypto Bloodbath: Two-thirds of Cryptos Died

Among the most daunting of these is the market’s inherent volatility and unpredictability, which tests the resilience of participants in this industry.

In order to delve deeper into these challenges, Alphaquest and Storible undertook an extensive analysis . The two organizations scrutinized the trajectories and development patterns of more than 12,000 cryptocurrency projects. The study aims to shed light on the factors that contribute to the longevity and success of projects within this tumultuous market.

Deadcoins through years
Credit: Alphaquest

The findings from this study revealed some striking statistics. Nearly two-thirds of all analyzed cryptocurrency projects have ceased to exist. During the bull run of 2020 and 2021, a staggering 72% of crypto projects were found to have failed.

Also, the average lifespan of cryptocurrency projects stands at three years. This suggests that an average project struggles to endure through a typical market cycle of four years.

Average lifespan of tokens
Credit: Alphaquest

Among the categories with the highest number of defunct projects were those associated with the Terra and Cardano ecosystems. Moreover, the average lifespan of a crypto project was determined to be just three years, indicating a lifecycle significantly shorter than a typical market cycle and highlighting the challenges faced by projects in sustaining long-term growth.

Bull Run Bust: 72% of Crypto Projects Launched During Boom Died

CCN spoke with Storible and Alphaquest, who made this report together, about dying crypto projects.

CCN: Nearly two-thirds of crypto projects fail and 72% of those launched during the 2020-2021 bull run are now dead. What do you believe are the primary factors contributing to the high mortality rate of these projects?

S&A: The high failure rate of crypto projects, particularly those launched during the 2020-2021 bull run, can mainly be attributed to the early stage of the cryptocurrency market, which was still solidifying its foundations. During that time period, it became evident that a race to take advantage of emerging market trends led to the establishment of projects lacking solid foundations, characterized by underdeveloped technology, unclear roadmaps, and inexperienced management teams.

There was also an influx of new crypto projects, resulting in a crowded space where only projects with genuine innovation or strong community support could succeed.

Furthermore, the industry suffered from numerous scams and high-profile security breaches. These significantly eroded trust among investors, prompting many to withdraw from riskier projects. An additional critical factor was the lack of practical applications or significant user adoption for many projects.

Together, these factors contributed to the high failure rate observed among crypto projects launched in this period.

CCN: The Terra and Cardano ecosystems are among the top 10 categories with the most dead coins. What lessons can be learned from the challenges these projects faced to improve the resilience and longevity of future crypto projects?

S&A: Reflecting on the challenges faced by the Terra and Cardano ecosystems, which rank among the top categories for dead coins, we can have some valuable lessons.

  • Focus on real-world utility. It is crucial to focus on developing blockchain technology applications that solve real-world problems that cannot be overstated. This approach ensures that projects offer tangible value to users, going beyond speculative investment opportunities. The goal should be to incorporate blockchain solutions into sectors where they can provide efficiency improvements, increased transparency, or other tangible benefits.
  • Technological innovation grounded in practicality. Cardano’s approach, emphasizing academic rigor and formal development methods, highlights the importance of building technological advancements around practical applications. Despite challenges in scalability and user adoption, the lesson here is clear: projects must not only innovate but also focus on scalability and meet the specific needs of their target audience in order to
  • Maintain economic stability and resilience. The collapse of Terra, particularly its algorithmic stablecoin, underlines the importance of specifically its algorithmic stablecoin, highlighting the significance of having a solid and tested economic model. Cryptocurrency projects must prioritize creating financial frameworks that can withstand market volatility.

CCN: A crypto project’s average lifespan is only three years, shorter than a typical market cycle. How can investors and developers better assess the potential longevity and viability of new projects?

S&A: For investors and developers to better evaluate the potential longevity and viability of crypto projects in a volatile market, they should note:

  • Fundamental analysis: When conducting fundamental analysis, it is important to avoid being swayed by hype. Instead, focus on evaluating the project’s core elements. These include the team’s experience, the problem in question, the economic model, and the technological infrastructure. By carefully considering these factors, they are more likely to identify projects with a strong value proposition and solid fundamentals that have a higher chance of long-term success.
  • Community and ecosystem support: One indicator of a project’s potential for sustained success is a vibrant and involved community, as well as strong partnerships and integrations within the ecosystem.
  • The ability to adapt and roadmap: Considering these factors can help determine a project’s potential for success. A clear, realistic roadmap with milestones can showcase the project’s dedication to long-term achievements.
  • The regulatory landscape: Having a good grasp of the regulatory stance towards the project and the ecosystem it operates can provide insights into potential legal obstacles or support that may affect its sustainability.

Crypto’s Enduring Impact and the Importance of Prudent Investment

The cryptocurrency market’s capacity for adaptation and resilience underscores its potential to significantly alter the financial landscape for the long term. While the prevalence of failed projects is a cautionary tale for investors, they should not overlook the persistent influence and relevance of cryptocurrencies in the financial sector.

As the cryptocurrency industry progresses, the emphasis will increasingly be on judicious investments and deriving lessons from historical trends. Considering the industry’s evolution, investors and participants must manage challenges and utilize technological progress. The role of cryptocurrency in redefining financial paradigms highlights the need for a strategic approach. Investors need to balance recognizing crypto’s transformative power with a commitment to thorough risk assessment and management.

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