AlphaQuest Reports on the Surge of ‘Dead’ Cryptocurrencies

The year 2023 has proven to be the most challenging for crypto projects in the latest four-year cycle, with developers abandoning 59.35% of tokens tracked on CoinMarketCap. This is according to research by AlphaQuest. 

High Mortality Rate

Analysts examined over 12,000 projects, identifying ‘dead’ ones based on four criteria: 

• low liquidity/trading volume — 92.6%; 
• non-functional website — 50.9%;
• delisted from CoinMarketCap — 47.6%;
• deleted X-account — 35.6% (no updates on X for more than three months — 26.9%).

Experts also highlighted instances of fraud where perpetrators acquired or accessed abandoned project accounts to promote scams. 

“By analyzing social media activity, investors can stay informed and exercise caution in the cryptocurrency world,” AlphaQuest reminded. 

Market Filtering

Analysts note that 72% of crypto projects (3473 out of 4834) launched during the bull cycle of 2020-2021 also failed. 

Researchers pointed to significant negative impacts from major bankruptcies. Following the collapse of the Terra ecosystem, over 35% of coins ceased to exist. The FTX exchange crash took down another 32% of tokens. 

“This statistic highlights the susceptibility of crypto projects to market fluctuations and underscores the importance of risk management in this volatile sector,” the researchers added. 

According to AlphaQuest, the average lifespan of startups in the digital asset industry is three years. This suggests that a typical project “can barely survive a four-year market cycle.”

Analysts report that only 22.4% of crypto projects last longer than the specified period. ‘Dead’ coins have an average lifespan of just 2.21 years. 

Affected Sectors

AlphaQuest identified several categories within the crypto industry where more than 50% of projects have ceased to exist:

• video and music — 75%; 
• asset-backed stablecoins — 75%;
• metaverses — 51%. 

The most affected ecosystems were Cardano and Terra, each with 74% ‘dead’ projects. Significant losses were also seen in Celo, Harmony, Near, Zilliqa, and Moonriver. 

Additionally, half of the startups backed by the bankrupt hedge fund Three Arrows Capital failed. Among other venture firms with more than 50% of crypto projects in their portfolio shutting down are Paradigm, DWF Labs, Polychain Capital, Andreessen Horowitz, Animoca Brands, Binance Labs, and Multicoin Capital. 

Earlier, CoinGecko specialists calculated that since the emergence of the GameFi segment, about 2127 out of 2817 projects in this direction have failed.

In 2023, venture investments in the digital asset industry fell by 68% to $10.7 billion.