A number of Australian cryptocurrency startups who raised millions in digital currency just six months ago have had to face the realities of a volatile and constantly fluctuating market, with the price of popular cryptocurrencies Bitcoin and Ethereum plummeting nearly 70% since the start of the year.
As 2017 ticked over into 2018, the cryptocurrency market was in the midst of an incredible boom, with Bitcoin prices going to a mind-boggling $25,000, and Ethereum reaching $2,000. However, since then the market has failed to repeat those highs, slowly falling throughout the year to current 12-month lows of Bitcoin at $8,500 and Ethereum at $380.
Though crypto investors were treated to a small 10% bounce this morning, the large majority of recent investors would be looking at portfolios dripping in red. Similar situations could be occuring for companies who jumped on the cryptocurrency train, as amounts raised during the market’s heydays are likely to be much less now.
For instance, local crypto-marketplaces startup CanYa raised $12 million at the end of 2017 and into 2018, which consisted of a mixture of Bitcoin and Ethereum sold at both public and private sale. Today, a conservative estimate would place the value of that raise at below $4 million dollars at current market prices.
Similarly, Australia’s largest ICO Havven raised $39 million in March this year for its ‘stablecoin’ technology. Today, that same amount in digital currency would likely be worth less than $13 million.
These calculations do not account for bonuses on tokens sold in private sales and for companies who have sold chunks of their ICO capital from digital currency to traditional currency, which many of them are likely to have done.
However, SmartCompany understands a number of prominent Australian crypto companies kept significant amounts of their raised funds as crypto, with Power Ledger founder Dave Martin telling StartupSmart in March it still had around half its raise as digital currency.
However, as Power Ledger’s sale was conducted when markets were at a similar stage, it’s unlikely the amount raised by the company has changed significantly.
Tokens hit hard
However, as the markets have tanked, so too have the tokens released by these companies to fuel their projects. The process of an ICO sees companies releasing their own digital assets to investors, with investors hoping those assets appreciate over time so they may profit.
Nearly every Australian cryptocurrency company’s tokens have depreciated beyond the price they initially began to trade at after their public sales.
Power Ledger’s token is currently trading at 0.173 US cents, having entered the market at around 2 US cents. Similarly, CanYa’s token is trading at 0.046 US cents, entering the market at $US4.10 – a drop of nearly 100%.
Havven hasn’t performed much better, trading at around ten US cents with a market entry price of 44 US cents.
The market drops have also scared off new local entrants to the cryptocurrency market, with the last Australian ICO to complete being intimate, who finalised a $12 million ICO in late May. The bloodbath has led members of the Australian startup scene to question the validity of ICOs as a funding method.
Agree. ICOs need to take a time out and reinvent themselves as a serious thing.
— Kate Kendall (@KateKendall) August 15, 2018