Cryptocurrencies have always been on the wild side of things, with fortunes made and lost on speculating which coins will go up, and which will go down. With the massive increase in price of Bitcoin in 2017, going from $3k in September and reaching $20k in December, many new cryptocurrency tokens began to arise.
The ICO craze was at its peak at the end of 2017 and early 2018 and in this time thousands of projects appeared claiming to be the next big thing. Once the markets cooled down, many of these projects went bankrupt or were outright abandoned, leaving many investors with coins that were worth next to nothing. Following the bear market of 2018, many coins dropped almost 96% in value, among which were also reputable projects.
The term "dead coin" became popular in this period, as the number of abandoned projects and failed ICOs was growing by the day. But let's be real here for a second, you didn't exactly need a lot to create a token project or sale. All that was needed was an ICO, easily facilitated through the Ethereum platform, a whitepaper to explain their project and a web page. Some had management issues, some tried to reinvent the wheel, some overpromised and some, well, were just outright scams.
There are over 1000 such "dead" projects, but that's not what we're here to discuss. Intead, we will focus on the top 5 "dead" projects and observe some of the reasons that led to their downfall.
Bitcoin Diamond (BCD)
BitConnect is by far the most famous and largest crypto related ponzi scheme in history. BitConnect launched in 2017, and promised substantial profits for users who deposited Bitcoin through their lending program. Users reported that the bonus payment system was never fully disclosed, and how these profits were created remained a mystery.
The project skyrocketed to the top 10 list by market capitalization, reaching $2,6 billion in December 2017, which started raising questions over the project's legitimacy. The rumour that BitConnect was basically a ponzi-scheme built atop a multilevel referral system started to grow, and many figureheads of the crypto space started to voice their concerns that such projects hurt the image of the whole market.
Suspicions lead to the fact that the bonus profits could only be obtained through deposits from new investors, however this information was never disclosed by the founders of the project. A cease and desist order from the regulators of Texas and North Carolina in early 2018 put a stop to the lending program and exchange, which in turn rendered the BitConnect (BCC) token almost worthless. Class action lawsuits began to ensue filed by disgruntled investors, and the company's assets were frozen by a U.S. court.
Despite the many hilarious moments of the company's "annual" ceremony, including best performance winner Carlos Matos, the truth is that many people lost their entire life savings investing in this token. It was a classic scam but with a fresh, new crypto face which deluded many as to its true nature.
XEM is the native token of the NEM (New Economy Movement) platform which was designed to be a convenient and fast way to make instant trasnfers worldwide without the fear of paying exorbitants fees. The project was launched in 2015, and development began in 2016. What made the projects unique was that it was made available as original open-source code, and that the NEM platform boasted the abilty to create a new kind of digital economy, where assets and commodities and currencies could be digitalized and traded freely on the platform.
XEM had held a firm grip on one of the top 10 spots in the market capitalization list, and was one of the most popular coins for a long time. This all changed when in January 2018 the Japanese exchange Coincheck, one of the largest at the time, publicly declared that a large amount of founds was stolen. Coincheck declared a total of $123,5 million worth of XEM token were taken from the exchange by the attackers, but other unconfirmed reports claimed a further of $600 million worth of XEM was actually stolen.
Even though the exchange promised it would find a way to reimburse their users, and the assurances made by the NEM foundation, this news lead to the sharp decline in the coin's value. In a few days the XEM's price plummeted 50%, and the coin is currently traded at $0.06, a 97% difference from it's ATH ( all-time-high) of $2.10.
DAO was an Ethereum based coin, and stands for Decentralized Autonomous Organization. The platform was the first of its kind to implement such a ruling mechanism, and the project's token sale was highly anticipated and sold very well.
What happened next was the incident that lead to the creation of Ethereum Classic and the demise of the DAO project. A hacker found an exploitability in the DAO smart contract, and proceeded to steal $50 million worth of Ether. After the event, Ethereum's community and developers concluded that a hard fork was necessery in order to roll-back the transaction and return the stolen funds, however this created a split in opinions that this course of action will set a dangerous precedent regarding the basic principles of blockchain : immutability. Despite the fact that an overwhelming majority (89%) voted for the hard fork, the remaining community to stick to the inital code. And such, Ethereum Classic was born.
Following the news of the hack, the token also started loosing its value and daily volumes soon shrank to the poin that it become worthless, and was abandoned by traders.
Bitcoin Diamond started as a hard fork of Bitcoin. A group of Bitcoin miners and developers whose identities are unknown decided that Bitcoin had become too slow and lagged behind other coins in terms of technological improvement. The proposed fork would have its block size increased from 1MB to 8 MB, a new encryption method, and faster block speeds which would decrease delay times and lower transaction costs.
The fork was created on Novemeber 2017, at block height #495866. Each Bitcoin would receive Bitcoin Diamond at a rate of 1 BTC=10 BCD. As Bitcoin's max supply will never be more than 21 million, BCD's max supply will never be higher than 210 million.
Detailed in the roadmap was that by 2020, Bitcoin Diamond would exceed Bitcoin in terms of its use cases, however since very little was made to this end, many began to question how the team will accomplish this goal. At launch, the BCD's price rose to $85 per coin, but is now being traded for $0.80, which is an almost 100% drop in value. It probably didn't help that Bitcoin Diamond was associated with a list of fraudulent websites that would clone crypto related websites, and use this method to steal the BCD tokens of regular customers by making them input their passwords.
Universa is a cryptocurrency that promised very much in its beginnings. It managed to raise over $28 million in ICO sale in Decemeber 2017, making it one of the most successfull Russian-based crypto projects at the time.
What made Universa interesting was the their goal to make a blockchain platform for business aplications, boasting that their protocol could handle 22,000 transactions per second (TPS). What also drove interest for the project were the partnerships with Ernst&Young, and a top level Russian bank, Alfa Bank. John McAfee, creator of McAfee anti-virus software, was invited to become a member on the project's advisory board. This was a common practice at the time as McAfee had become a well-known influencer in the crypto space and many projects were paying to be associated with him.
Despite all the promising signs, arguments among the company's management broke out shortly after the market crash of early 2018, resulting in lawsuits being filed by the team's members against each other. Daily trading volume started to plunge, and the coin found itself delisted of several exchanges, main one being HitBTC. Surprisingly, the developer team is still active.
With crypto, you never know what you're going when you decide to make investment in something that isn't Bitcoin. Many promising projects took the route of the 5 listed above for a variety of reasons which investors simply couldn't have anticipated. The emotional rollercoaster of waking up and finding out that your investment is suddenly worth 0, or the agony of watching your favorite project slowly die is painful to describe and not recommended to the faint of heart. Generally speaking, you should always stay away for low liquidity - high volatility assets, and your safest crypto bet would be to just invest most of your funds in Bitcoin.