How is cryptocurrency created?
It is worth noting that creating a cryptocurrency is a relatively easy process, and anybody can do it.
Whether that project achieves any significance – or survives at all – is a different story. Most do not.
There are several different options for making a cryptocurrency. Creating a blockchain and a native token or modifying the existing blockchain are the more difficult options and require more technical knowledge and training.
Meanwhile, making a coin on an existing chain, or paying a developer to make it, is a lot easier.
Many will opt to create a cryptocurrency on an existing chain, and there are even online tools that allow the creation of tokens and blockchains without programming knowledge.
The more one wishes to customize the coin, the more knowledge is needed.
Once the crypto is created, the coins are minted for issuance.
This is the simplest, most basic explanation. Serious projects will invest a lot of time and money into their crypto, they will have a highly skilled team of developers constantly working on it, and the project will be thoroughly audited.
Meanwhile, there are other estimates out there per which there may be some 20,000 cryptocurrencies in existence. “Most of these are either inactive or discontinued,” said Statista.
These coins are typically referred to as ‘dead.’ They cease to exist due to a number of reasons, including halted development, lack of users or traders, fraud exposure, and more.
Per 99bitcoins, as of February 2023, there are at least 1,774 dead coins. And these are the reported projects.
A 2024 report conducted by AlphaQuest and Storible, which analyzed 12,343 cryptos, found that nearly two-thirds of cryptocurrencies created over the past several years “have met their demise.”
2013-2020: From 66 Coins to 4,000
The crypto industry has seen significant growth in the seven years up to early 2021, as per Statista data.
While it may be difficult to fathom today, there was no top 100 coins per market capitalization to talk about in 2013. At the time, there were only 66 available cryptos.
However, within a single year, the 66 jumped 666.6 % to 506 in 2014.
Over the following two years, the market saw a more modest increase: there were 562 coins recorded in 2015 and 644 in 2016.
This is where we notice another sharp increase in the number of cryptocurrencies, surpassing the 1,000 mark. In 2017, it increased 107% compared to 2016, hitting 1,335 coins.
Two years later, in 2019, the 2,000 mark was surpassed, with the number of coins reaching 2,817.
Between November 2019 and February 2021, another 1,694 coins were added to the available lot – nearly doubling the amount and totaling 4,501.
This 2020-2021 period and the bull run that marked it were very significant for the industry.
CoinGecko found that most dead cryptocurrencies came from projects launched during this bull run.
The data aggregator stated in a January 2024 report that,
“7,530 cryptocurrencies from that period have died, accounting for 53.6% of all dead cryptocurrencies on CoinGecko. Over 11,000 cryptocurrencies were listed on CoinGecko during the previous bull run, with ~70% having shut down since.”
However, when the researchers looked at the results of the 2017-2018 bull run, they discovered that 1,450 projects shut down. “This is on the back of over 3,000 cryptocurrencies listed, resulting in a similar fail rate of ~70%.”
As for the reasons behind the high rates of dead coins, CoinGeko identified the ease of deploying tokens and the rise in popularity of meme coins as contributing factors.
Many meme coin projects launched but without a product to offer and were soon abandoned entirely.
2021-2022: Hitting the All-Time-High
2021 saw major increases in the number of available cryptocurrencies.
While there were 4,501 coins in February, by July that same year, the number was up to 6,044.
Soon after, we notice the first drop in this ten-year time frame. In August 2021, the number fell to 5,840.
That said, just two months after that, it surpassed the July level, climbing to 6,826, and ended the year with 7,557.
This ‘rally’ resulted in a new all-time high (ATH) at the beginning of 2022.
Between November 2021 and January 2022, the number was up 31.4% to 9,929.
Then in February 2022, it hit its final ATH to date: 10,397 different coins existing in the nascent ecosystem.
Therefore, between February 2021 and February 2022, the number of coins increased by 131%.
Following the ATH, the space recorded a 10.5% fall in November 2022 to 9,310.
According to CoinGecko, nearly 6,000 cryptocurrencies from 2021 failed. The report stated that,
“Cryptocurrencies created in 2021 have suffered the worst, with 5,724 having died as of January 2024. Over 70% of cryptocurrencies listed on CoinGecko in 2021 have died, making it the worst year for project launches.”
2022 follows it as another bad year: 3,520 listed coins died (~60%) by January 2024.
Moreover, the AlphaQuest and Storible report also found that most cryptocurrencies born during the 2020-2021 bull run failed, saying:
“In particular, out of the 4,834 crypto projects introduced during the bullish trend, 72% failed to survive.”
2023-2024: 13% Drop from ATH
A notable development in 2023 is that the year saw two more drops in the number of cryptocurrencies. This is as many drops as recorded over the previous nine years combined.
All in all, the numbers haven’t moved much since the November 2022 level of 9,310.
February 2023 saw a decrease to 8,685, followed by a slight increase to 9,321, then dropping again to 8,866 by the end of the year.
January 2024 began with 9,024 cryptocurrencies. Compared to February 2023, this is a 3.9% increase.
However, compared to the February 2022 ATH, January 2024 saw a 13.2% fall in the number of cryptocurrencies available.
That said, between 2013 and 2024, the crypto space witnessed a 13,572.7% rise in the number of cryptocurrencies.
CoinGecko found that 289 cryptocurrencies listed on the platform in 2023 subsequently died, stating:
“This represents a failure rate of <10%, with over 4,000 cryptocurrencies listed, a sharp decline from previous years.”
The AlphaQuest and Storible report stated that, among 12,343 crypto projects investigated, 8,854 have become defunct in the past year.
Leading up to 2023, it said, there has been a decrease in the cryptocurrency market, leading to the death of 65% of projects.
Per this report, “2023 is the toughest year in the 2020-2023 cycle, with nearly 60% of dead coins disappearing during that period.”
That said, 2023 was indeed a difficult year for crypto projects, bearing the brunt of the 2022 crypto industry crisis.
The entire space suffered due to the bear market fallout and the domino effect that began in 2022 with the collapse of the Terra/Luna ecosystem, followed by the infamous fall of the FTX exchange and its sister company Alameda Research.
These events were so monumental that their effects are still felt, and the companies’ executives are facing prison time.
Then, after months of struggling, crypto lending and trading firm Genesis, a unit of the Digital Currency Group (DCG), filed for bankruptcy following a significant loan loss to the now also defunct Three Arrows Capital.
The aftershocks impacted numerous projects and coins. Companies like Celsius, Voyager, BlockFi, RECUR, LBRY, Nifty’s, Bittrex Global, and Wyre all announced they’d wind down their operations in 2022 and 2023, citing hostile market conditions and/or debts.
Therefore, according to CoinMarketCap, these project’s coins are just some of those that died over 2023.
Losses from these various collapses numbered in the billions. FTX alone had an $8 billion hole in its accounts.
The collapses also showcased how interconnected the crypto ecosystem was at the time.
Poor management, mismanagement of funds, lack of liquidity, and cyberattacks contributed to the fallout, fueling the bear market, which in turn increased the pressure on the market participants until many buckled under it and went bankrupt.
2025: Could This Be The Year of the Most Crypto Projects Launched?
After the Terra crash, 35% of crypto projects were deemed defunct, the AlphaQuest and Storible report said. And after the FTX fall, 32% of crypto projects closed shop.
Half of the cryptocurrencies backed by Three Arrows Capital subsequently failed.
“Other top-tier VCs with over half of their projects in their portfolio having died include Paradigm, DWF Labs, Polychain Capital, a16z, Animoca Brands, Binance Labs, and Multicoin Capital,” it said.
No ecosystem was safe. Cardano witnessed 74% of the projects in its ecosystem go defunct. For Terra, it was 74% of the projects. Furthermore, Celo, Harmony, Near, Zilliqa, Moonriver, and others all experienced “notable losses.”
Meanwhile, the report found that a whopping 93% of the dead projects suffered from low liquidity or trading volume.
58% of them had Twitter accounts or websites that were either inactive or deleted, and 48% were removed from major tracking platforms such as CoinMarketCap.
Moreover, the average lifespan of a crypto project is three years, “which means an average project can barely survive through a market cycle of 4 years,” the report said.
Commenting on the decrease in the number of cryptocurrencies, Ramy Bekhiet, Senior Advisor and Commercial Partnerships Coordinator at PDX, told Cryptonews that projects are realizing that they need to offer real-world utility.
“Also, with regulations looming around, projects are becoming more careful in how they operate and launch new coins/tokens,” he said.
Aaron Rafferty, co-founder and CEO of technology incubation hub Standard, said that,
“The drop is clearly the tail end of the last bull market and aftermath of overspeculation, hype cycles that failed, and fraudsters that ran pump-and-dump schemes. Many of these individuals are still in the market under alternative personas, and the creation of new tokens and projects is far from over.”
In fact, with Large Language Models, the gap to launch a crypto project is lower than ever, said Rafferty, and requires zero coding experience.
Platforms like Solana are attracting hundreds of millions of consumer investor dollars, speculating on the next pump-and-dump scheme. This week alone, we saw $149.2 million in funding go directly to 33 project presales where personalities on Twitter effectively shared a wallet address to which people sent their SOL tokens.
The Base chain will have a similar moment as it is even easier and cheaper to launch a project there, with fees costing less than $1 for the entire process, Rafferty argued, adding:
“Couple these two factors together along with the ETF [exchange-traded fund] approvals and lack of regulatory clarity from the SEC [US Securities and Exchange Commission], and 2025 will be the year of the most crypto projects launched that we have ever seen. The gap now seems to be the size of one’s audience and ability to draw a crowd.”
Peter Eberle, President and Chief Investment Officer of Castle Funds, commented that the reason we are excited about some cryptocurrencies is the underlying technology that some of these have developed.
This includes Bitcoin as a means of transferring large amounts of money across borders without middlemen and on a public distributed ledger. Also, there’s Ethereum and its smart contracts that can be executed based on predetermined rules.
However, said Eberle,
“Unfortunately, many others provide nothing of value. Meme coins are cheap to issue and extract money from people chasing quick riches, enriching the issuers. New coins will continue to be released, and others will collapse. Investors must do their own research and due diligence. Don’t be someone else’s exit liquidity.”
Meanwhile, the AlphaQuest and Storible report noted that, despite the downfall of numerous coins, many new projects and narratives emerge each month.
It stated that “the cryptocurrency field still holds promise for the future” and “the enduring relevance of cryptocurrencies cannot be underestimated.”
Conclusion
Between 2013 and 2024, there was a 13,572.7% rise in the number of cryptocurrencies, from 66 to 9,024, according to Statista.
Compared to the February 2022 ATH of 10,397, there was a 13% drop by January 2024 in the number of cryptocurrencies available.
Year-on-year, from February 2023 until January 2024, the space saw a 3.9% increase in the number of available coins worldwide.
There were four recorded drops over the past decade: August 2021, November 2022, February 2023, and December 2023.
Why do cryptocurrencies fail?
Some of the key reasons why the cryptocurrencies fail and end up dying include:
- crypto volatility
- unpredictability
- lack of investment and trading volume
- abandonment by developers
- lack of regulations
- over-speculation
- hype cycle fails
- hacks
- fraud (such as rug pulls).
Most projects created during the 2020-2021 bull run have died by now. Most new coins don’t even last one four-year cycle.
Per various reports, 2021 and 2023 were particularly bad years for crypto projects. Bear markets, as well as a string of bankruptcies that began in 2022, led to the fall of numerous projects.
All that said, more cryptocurrencies are being created every day. Following the improvements in the crypto space and approval of ETFs, 2025 may see the most cryptocurrencies created yet.
