The crypto crash left 12,100 coins in zombie trading limbo.

The oft-quoted number to put a number on this year’s crypto swoon is $2 trillion, which will evaporate in digital-asset market value in a downdraft. But here’s a number that captures the breadth of the crypto bear market: 12,100. That’s the number of crypto tokens that have effectively ceased trading this year—not technically dead, but like zombies, not alive either, according to data provider Nomics.

Most blockchain projects are built around digital coins, which often serve as user rewards and incentives to continue by compensating developers for their work. During last year’s price crash, thousands of crypto startups issued new tokens to support these projects, and the bullishness meant that the market had a lot of interest in attracting most of them and still pushing the price higher. That all changed this year, as macroeconomic conditions kept investors away from risk assets and caused inflation to take a nosedive. The Terra blockchain implosion, as well as the collapse of hedge fund Three Arrows Capital and crypto companies such as the Celsius Network, led to further sales and frozen venture capital funds. Bigger tokens like Bitcoin and Ether suffered major declines before finally finding support. But for many coins that support risk-taking and draft efforts, the decline has caused a kind of kick in the wheels.

Nomics compiled coin activity for Bloomberg and found that more than 12,100 tokens have become ‘zombies’ this year, which are tokens that haven’t been traded for a month. That’s twice as many as all previous years, combined. “During the bull market of 2021, there was a lot of money, attention and cash flow for new and existing projects,” said Jacob Joseph, an analyst at CryptoCompare. However, in an ongoing bear market, even the best projects with utility will struggle. to sustain their operations by losing access to capital and funds.”

This contrasts with initial coin offerings from the previous bear market since 2018. From there, startups issue coins – often illegally – to raise funding. Most ICOs didn’t have working prototypes, much less users, only investors got burned when they took root. And the market was small. In 2018, a total of 136 tokens were turned into zombies, while 766 coins received that designation in 2019, a year-on-year low.

Nick Gauthier, co-founder of Nomix, said it’s difficult to know the scope or seriousness of the projects affected at this time, whether it’s a piece of irony, short-term assets or small private projects. A project called BoomSpace, which supposedly works on blockchain gaming, no longer has a live website, but only a Twitter account that hasn’t been updated in months. Elonmoon, a token for a game related to lunar exploration, warned CoinMarketCap, “We have received several reports that some holders are unable to sell their tokens. Please be careful and take care of yourself!”

Even between active coins, trading can be thin. Of the more than 64,400 properties Nomics tracks, only about 13,800 had transaction volume in the 24-hour period last week. And there are tons of coins that aren’t zombies yet, but are sold closely, and at a fraction of the cost—like Terra Classic—perhaps offering a chance to those with a taste for adventure.

While many projects hold their own coins as backups during development, the current environment suggests that startups take a more cautious approach, perhaps holding widely traded and valuable coins like Ether or cash as backups. “I think crypto projects need to make sure they’re ready for the lows as much as they want to ride the highs,” Gauthier said. Still, with no respite for the market environment, zombie levels will increase, said John Griffin, a finance professor at the University of Texas at Austin.

It’s not as common in crypto as in other industries when coins turn into zombies and projects are effectively destroyed. “There’s no storefronts to board, no goods to sell, no workers to claim unemployment,” said crypto investor Aaron Brown.

This dynamic is one reason why new coins are born when others are abandoned, and why the next bull market brings more new tokens – many of which may become zombies in time. Aaron Brown said, “Because crypto startup costs are close to zero and anyone in the world can try without bias or regulation, more people will continue to try.” “Cyberspace is not a warehouse with limited capacity,” he added.

Olga Karif is a crypto reporter at Bloomberg.

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