A thousand crypto project failures follow one crypto success story like Bitcoin. There are a lot of projects in the crypto world that are no longer around for a lot of different reasons. Here are some of the most common reasons why crypto projects fail. If you own tokens, this should help you spot some red flags.
Hundreds or even thousands of new cryptocurrencies and tokens come out every year. But not many make it through, the community will forget most projects, and their tokens will be worth almost nothing. Too many things can go wrong with a project to pass. One of them is not being able to get investors.
Crypto Projects and Use Case
Investors are one group of individuals who are not on the team but are crucial to the company process. You have to make strong reasons to convince them because they have seen a lot of unsuccessful ideas.
For instance, social profiles of new crypto projects simply provide really ambiguous content in their profile, like “built by the people for the people.”
Simply said, a lot of cryptocurrency firms fail because they are unable to prove that their concept can be profitable. It is challenging to draw the interest and money required to keep a project going without a clear route to profitability. Furthermore, a lot of projects exaggerate the value of their token or coin.
Investors in venture capital are unlikely to support a business without a well-defined long-term strategy. Although you can’t guarantee precise results, you can at least outline the project’s phases, how you plan to use the funds, and other details.
The inventiveness exhibited in cryptocurrency is one of its best features. Since trading Bitcoin was the sole option available, the market has evolved significantly, with entire subsectors emerging and seeing billions of dollars invested in them.
But new concepts often bring new risks. Problems are likely to arise if such concepts are rushed through or if every possible combination isn’t considered beforehand. This was the situation with the 2022 LUNA/Terra collapse. Terraform Labs believed they could develop a stablecoin that would rely on market forces to maintain equilibrium rather than collateral. Its developers, however, were unprepared for how strong sell pressure would affect the UST and LUNA coins. The outcome was a death spiral in which the two coins completely lost value, bringing down the platform and the $40 billion in invested capital along with it.
Terra will always be remembered as the quintessential example of a crypto-shortsighted and unprepared person.
Inexperienced Owners and Managers
It may sound unusual, but incompetent project managers are usually to blame for the failure of most cryptocurrency initiatives rather than subpar technology. They may have great ideas or be exceptionally skilled programmers, but they lack business management skills. It frequently leads to inadequate money, ill-advised ambitions, and poor administration. As a result, the initiative causes investors to lose their investment.
A company will fail if its founders lack the expertise, commercial acumen, and self-control necessary to create a successful enterprise. If these elements are absent, even the most creative idea will come to a standstill.
Change of Trends
Trends in cryptocurrency can shift quickly, with developers and creators quickly moving on to the next hot thing. This implies that developers may just give up on smaller projects that don’t gain much traction; however, users may not be aware of this because the website remains operational and the code continues to function, making it difficult to discern when development is taking place.
This is especially problematic if you own the project’s cryptocurrency; you might have purchased it with the hope that its founders would change their minds or get disillusioned and move away, allowing your investment to plummet to nothing.
No Use Care, Not Solving Any Problem
A use case that can address a practical issue is absent from the majority of Bitcoin efforts. Often, it results in low uptake and project failure in the end. The majority of recently released coins are only useful within the blockchain.
Here’s a crucial piece of advice: if your concept is futuristic, start with a more realistic version. Try to find a method to include it in one or more major industries. Your service should ideally automate offline tasks like filling out papers for government offices.
Cybercriminals
Cryptocurrency hacks continue to be a plague on the industry, with bad actors taking advantage of flawed designs or vulnerabilities in people to breach protocols and steal the money within. These days, though, hackers only need to figure out how to manipulate the system to bring a platform to its knees—they don’t even need to do anything illicit.
People earn a living by playing casinos at their own games, so the idea of gaming a system is not new. However, when combined with cryptocurrency, it can have extremely negative long-term effects. Although it is extremely difficult to game a DeFi platform, there have been instances where people have examined the code and figured out how to influence specific platform characteristics. They have been able to pilfer cryptocurrency valued at tens or even hundreds of millions of dollars thanks to this.
These behaviors are essentially backdoors that the platform’s developers were unaware of, and they frequently occur within its confines. Because of this, developers and potential attackers are engaged in a never-ending struggle over system exploitation.
Pulls for Rugs
The most frustrating way for an enterprise to fail is if its creators just close their doors, sell their shares for a huge profit, and take off with the money. Although this is referred to as a “rug pull” and is strictly forbidden, due to the global nature of cryptocurrency, consequences are rare.
Rug pulls are often unnoticeable, but you can detect a warning indication if you keep an eye out for unusual price movements in the token.
Little to No Profit
The creation of revenue is essential to any firm. A project will eventually come to an end without a consistent supply of funding.
For a cryptocurrency project, the most popular and effective way to raise money is through token sales. It may assist you in obtaining the funding required to advance the idea and promote it. Token sales, however, are not without dangers and difficulties. You can wind up reducing your ownership stake in the project if you’re not careful.
Another approach to making money is through partnerships. If you can attract partners who are prepared to invest in your project, you will receive a portion of their profits. On the other hand, this approach is often unstable and takes a while to produce a sizable profit.
The most crucial thing to keep in mind is that you need to start with a strategy in place for generating revenue. Therefore, make sure you have a clear plan for turning a profit before you start working on it. If you don’t, you’re inviting failure into your life.
Unable to take constructive criticism
No matter what you do, at some time you will face criticism. The regulator will chastise you if you raise their suspicions or irritate users. Even though you can’t foresee what obstacles you may face down the road, you may prepare ahead of time for what you will do in the event of an emergency.
Presenting a thorough solution that answers the objection and adds value beyond what the client is already receiving, utilizing the objection to enhance the product, and, finally, presenting an alternative solution that still benefits the consumer are three strategies you can use to overcome objections.
If you prove to your detractors that you appreciate their opinions and are prepared to grow from your errors, they might turn into devoted followers.
Inefficient advertising
Finally, without marketing spending, even the best solution will be ignored.
Establish a powerful online presence on well-known websites and social media networks. Writing educational blog articles and other content that ranks highly on search engine results pages and makes use of the appropriate keywords is another essential element.
Making sure that you are visible and that potential clients can discover you requires time and effort. On the other hand, internet marketing for businesses can be an inexpensive and effective way to reach a wide audience.
