ICO Blockchain Projects are Holding More Ethereum Than Their Actual Market Cap

The 80 percent correction in the global cryptocurrency exchange market has created a unique setting in the initial coin offering market.

The development teams of most tokens are now holding more Ethereum in their reserves than their market valuation.

Other projects like Tezos, Bancor, and Aragon have demonstrated similar trends, holding significantly more funds in Ethereum than their market valuation.

Bancor raised over $150 million in its highly anticipated token sale but its current market cap remains below $83 million.

The primary reason why most ICOs and blockchain projects have ended up with more Ethereum than the size of their market cap is the weak momentum of small market cap cryptocurrencies against major digital assets, particularly Bitcoin and Ethereum.

As shown in the chart below, the price of Gnosis token dropped by 92.7 percent from its initial price of 1.3 ETH to 0.095 ETH. In the past eight months, tokens like Gnosis, Bancor, Aragon, Ontology, ICON, and many more have fallen by 60 to 90 percent against Bitcoin which fell by 65 percent on its own, recording 95 to 98 percent losses from its all-time high in December 2017.How Should Tokens be Valued?

As the price of tokens plunged due to the 2018 correction of the crypto market, a growing number of investors have expressed their dissatisfaction towards the mid-term trend of tokens and the fact that most tokens are in fact holding a larger amount of Ether in their reserves than their market valuation.

Since the price formation of tokens starts with token sales, the frustration of investors regarding the unique situation with tokens and their market valuation is understandable.

The lack of a realistic maximum cap for token sales has also contributed to the widely recognized trend of the market cap of ICOs falling below their operating capital.

In the ICO market, there exists no solid concept of valuation and base price, as most of the capital is driven by pure speculation, which is also one of the reasons why the vast majority of blockchain projects tend to fail and investors tend to lose in the long run.