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According to a recent analysis of over 12,000 cryptocurrency projects, almost two-thirds of crypto initiatives launched in recent years have failed.
The study, carried out by AlphaQuest and Storible, revealed that 72% of projects initiated during the 2020-2021 bull market have not succeeded.
Moreover, out of 12,343 crypto projects examined, more than 8,850 have become inactive in the past year.
The year 2023 has been identified as the most challenging within the 2020-2023 cycle, with nearly 60% of defunct coins vanishing during this timeframe.
Overall, the research indicated that by 2023, 65% of crypto projects had ceased operations.
The analysis also pointed out that the Terra and Cardano ecosystems have the highest number of inactive coins.
The researchers applied specific criteria to classify projects as “dead,” which included low trading volume, insufficient liquidity, inactive or deleted Twitter accounts, non-functioning websites, and removal from CoinMarketCap.
Common Characteristics of Dead Coins
The report noted that the examination of “dead coins” revealed several shared traits among the failed projects.
A significant majority, 93%, experienced low liquidity or trading volume, reflecting a drop in investor interest.
Additionally, over half (58%) of these unsuccessful coins had inactive or deleted Twitter accounts or websites, signifying a lack of ongoing social engagement or operational activity.
Furthermore, nearly half (48%) were delisted from major tracking platforms like CoinMarketCap, reinforcing their failures.
The vulnerability of crypto projects to market volatility and bankruptcies was also highlighted in the research findings.
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The collapse of major entities such as Terra and FTX led to a substantial percentage of projects failing.
Following the Terra incident, 35% of crypto projects were classified as defunct, while the FTX downfall resulted in the closure of 32% of projects.
The study also emphasized the influence of high-profile investors on project outcomes.
Half of the projects supported by Three Arrows Capital, along with other notable venture capital firms, faced failure, underscoring the unpredictable nature of the crypto environment.
Average Lifespan of Dead Crypto Projects
The report determined that the average lifespan of crypto projects was three years, highlighting the difficulties they encounter in navigating market cycles.
The research indicated that defunct projects had an even shorter lifespan of merely 2.21 years, with a considerable number lasting less than a year or six months.
Only 22.40% of crypto projects managed to survive beyond four years.
Despite the high failure rate, the cryptocurrency sector still presents potential for the future.
The ongoing emergence of new projects and narratives illustrates the market’s adaptability and resilience, according to the report.
“Looking ahead, the focus should be on making informed investments and learning from previous experiences. As the industry continues to progress, it will be essential to navigate challenges and embrace technological innovations,” the report stated.
“The undeniable importance of cryptocurrency in shaping the future of finance compels investors to approach it with a critical perspective, acknowledging its transformative potential while stressing the necessity of risk management.”
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