November 8, 2023 at 13:59 GMTModified date: November 8, 2023 at 13:59 GMT
November 8, 2023 at 13:59 GMT

New crypto token creation dips to lowest since 2021

According to blockchain smart-contract auditor CertiK, the amount of new token creation is now at its lowest level since at least the start of 2021.

New crypto token creation dips to lowest since 2021

New cryptocurrencies are getting created at a snail’s pace in the third quarter of this year. According to blockchain smart-contract auditor CertiK, the amount of new token creation is now at its lowest level since at least the start of 2021.

A total of 293 new tokens were added in the third quarter. This is down from 366 in the Q2 and 449 in the year-earlier period. Compared to before, the current level stood quite low from the heights of 1,261 new token creation of the bull market of the fourth quarter of 2021.

The data that revealed this was compiled by using the list of tokens added each quarter to the tracking website CoinMarketCap. It does not include the so-called memecoins as they have no apparent purpose other than creating FOMO and speculation in the market.

CertiK’s co-founder, Ronghui Gu, who is also an assistant professor of computer science at Columbia University in New York, tagged this as a repercussion of the so-called crypto winter: “It may still be a sign of crypto winter where everyone has paused developing and launching, waiting for the arrival of spring.”

Similar discoveries were made by other reports like the one from digital-asset firm Galaxy that was published last month. It noted that venture-capital funding for crypto and blockchain projects slid last quarter to the lowest since late 2020.

However, a recent blog post published by Morgan Stanley Wealth Management claimed the ongoing crypto winter to be nearing its end. Referring to the four “seasons” of Bitcoin’s historical trading cycle, analysts talked about how its “halving” event comes along with bullish sentiments in the market.

Its author, Denny Galindo said: “Based on current data, signs indicate that crypto winter may be in the past and that crypto spring is likely on the horizon.”

Other factors

CertiK also highlighted the general decline in liquidity as one of the other contributing factors for declining new token creation. In the recent past, multiple blockchain projects have had lay-offs to deal with the ongoing market conditions. 

Last week, leading NFT marketplace OpenSea, joined the list of companies to cut off staff as it announced a 50% reduction. This is for “building a new foundation”, said its CEO in a post on X (formerly Twitter). “We will change how we operate – shifting to a smaller team with a direct connection to users”, added Devin Finzer.

According to a crypto analyst of investment-research firm FundStrat, Sean Farrell, there has been a general decline in liquidity in the industry. During such a time, “no one wants to list a token when there is a lack of risk-taking”, he added. 

The drop in token listings may also reflect, to some degree, a maturation of the crypto industry. “There are more legitimate projects out there now, so the battle for that incremental liquidity is tougher. The bar for launching a token is higher”, said Farrell. 

On top of this, the unclear regulatory environment of the USA also adds to the worries, further discouraging projects from launching tokens. 

The month of October was comparatively better as Bitcoin ($BTC) carried off a powerful rally, which helped it go above its key $35k price level. This bullish sentiment was also reflected in a number of major altcoins that have been on a rise.

Last week’s report by digital asset management firm CoinShares also showed investors returning back to the market as crypto funds had their best run of inflows since the 2021 crypto bull market. Data revealed that investment vehicles holding cryptocurrencies saw $261m of net inflows in that week, recording six consecutive weeks of positive influx totalling $767m inflows.