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Crypto startups could go bust in 2019

Many crypto companies will struggle to survive this year, according to industry observers, after collapsing prices in 2018 depleted the reserves needed to fund their businesses.

Companies in the space are already laying off workers, shutting down operations, and scaling back plans into the face of significant headwinds.

He said Anthony Maguire, formerly a Facebook employee who now runs a blockchain advisory and education business focused on emerging markets. "Tech startups go bust all the time. People just forget about them. "

Cryptocurrencies exploded in popularity in 2017, largely thanks to two factors: bitcoin's price and the explosion of 'initial coin offerings'.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "The price of bitcoin (BTC-USD) rose in 2017 and this attracted to the market. By December 2017, bitcoin was worth close to $ 20,000. "Data-reactid =" 36 "> The price of bitcoins (BTC-USD) rose in 2017 and this attracted to the market, most of whom hoped to make a fortune from the price rise By December 2017, bitcoin was worth close to $ 20,000.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Meanwhile," initial coin offerings "or ICOs exploded These innovations were developed by their own digital tokens, structured to little like bitcoins, to fund their business. second biggest digital currency. By the end of 2017, there were over 1,000 crypto tokens in circulation. "Data-reactid =" 37 "> Meanwhile," initial coin offerings "or ICOs exploded. bitcoin, to fund their business.Most startups sold their tokens in exchange for ethereum, the second biggest digital currency.With the end of 2017, there were over 1,000 crypto tokens in circulation.

However, the crypto hype has unraveled this year.

Bitcoin's price slid throughout 2018 and it now trades around $ 3,800. The market collapsed when the supply of new investors. Without the speculators, those owning bitcoins found there was little demand or use for it.

At the same time, the prices of most ICO tokens have also collapsed as the projects have failed to deliver on their often lofty promises.

"We've got a 90% s *** coin marketplace, where people have lost money because the realizations have been there is no utility," Edd Carlton, the head of OTC trading at BlockEx, told Yahoo Finance UK.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Crucially, the price of ethereum (ETH-USD) has also collapsed from over $ 1,000 in January 2018 to around $ 130 today. "I've been trying to get their money out of them." Data-reactid = "43"> Crucially, the price of ethere (ETH-USD) has also collapsed from over $ 1,000 in January 2018 to around $ 130 today That means that startups that sold ICO tokens for ethereum have seen their cash piles dwindle unless they hedged their exposure somehow.

Crashing back to earth: Ethereum spiked in value in 2017, before crashing in 2018. Photo: Yahoo Finance UK

"There's less propping up poorly managed companies now than there was in January," Maguire told Yahoo Finance UK. "It's easier when you have years and years of runway and huge valuations."

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "The effects of the market are already being felt . Blogging website Steemit is axing 70% of staff after the collapse of its digital coin. SpankChain, an adult entertainment crypto project, is reducing its staffing levels by around 60% for similar reasons. "Data-reactid =" 65 "> Blogging website Steemit is axing 70% of staff SpankChain, an adult entertainment crypto project, is reducing its staffing levels by around 60% for similar reasons.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "And ConsenSys, one of the most high-profile crypto companies, has announced plans to cut around 13% of staff.& nbsp; Reports since have as many as 60% of staff at ConsenSys could eventually be go go."data-reactid =" 66 "> And ConsenSys, one of the most high-profile crypto companies, has announced plans to cut around 13% of staff Reports since they have been as many as 60% of staff at ConsenSys could possibly be let go.

Crypto miners – companies and individuals who are underpinning the network of coins like age and bitcoin – are also struggling. The cost of "mining" bitcoins has risen even as prices.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "US bitcoin miner Gigawatt filed for bankruptcy in November and layoffs are underway at Bitmain, one of the largest bitcoin mining equipment makers in the world. "data-reactid =" 68 "> US bitcoin miner Gigawatt filed for bankruptcy in November and layoffs are underway at Bitmain, one of the largest bitcoin mining equipment makers in the world.

Lucas Friss, head of business development at Cumberland Mining, told Yahoo Finance UK. Cumberland Mining is an over-the-counter cryptocurrency trading business owned by Chicago prop trading company DRW.

Friss said: "There's a lot of questionable projects and things that are going to be out of the system." He was speaking generally and did not single out any specific projects.

As well as crypto startups going under, Maguire predicted that many crypto investment funds will also shut down in 2019.

He told Yahoo Finance UK, "You have a lot of funds that were started to be going to survive. "Part of that is confirmation bias. If you bought bitcoin in January 2017, you probably think you're an investment genius. "

However, like Friss, Maguire said this expected crypto clear out should be good for the space.

"People who are still going to [crypto] meet-ups right now are people who really care and people, "Maguire said. "I think we're going to have in 2019 is less hype, more hard work, and more deliverables."

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<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Oscar Williams-Grut covers banking, finance, and finance for Yahoo Finance UK. Follow him on Twitter at & nbsp;@OscarWGrut."data-reactid =" 80 ">Oscar Williams-Grut covers banking, finance, and finance for Yahoo Finance UK. Follow him on Twitter at @OscarWGrut.

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