ERC-20 token creation had ramped up during the bull runs of 2021. These altcoins had been propelled forward by the success enjoyed by the likes of Dogecoin and Shiba Inu, causing a large influx of new coins into the market. These “shitcoins” had mostly turned out to be scams or quick pump and dump schemes, albeit successful for the creators. Now, though, the tide has begun to turn as token creation has taken a nosedive.
A new report has shown that the creation of ERC-20 tokens has tanked in 2022. This is no surprise given that the market had been in a bear run for the better part of the year. Thus, making it less profitable for the creation of new tokens.
This decline was especially pronounced for the month of May. Analytex reports that ERC-20 token creation had dropped by 39% in May. The numbers show the accelerated rate at which these new tokens were being put into the market. In April, there were 112,996 total tokens created across various networks in the space. While in May, this number had dropped to 68,380 tokens created, declining across all the different networks.
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It is in line with the decline that had been seen across various spheres in the space. An example is the decrease in DeFi TVL. Between April and May, the total TVL had declined by more than 40%, and the price of Ethereum had slumped below $2,000. The DeFi explorer also notes an increase in the transaction volume due to investors trying to sell off their coins as the price of ETH dropped and sentiment suffered.
ETH trading at $1,765 | Source: ETHUSD on TradingView.com
The creation of ERC-20 tokens is spread across a number of networks. Thousands of tokens are created on these networks on a monthly basis. But as expected, there are some networks where this activity is more pronounced than others.
The BSC network has been a hotbed for the creation of ERC-20 tokens. The network sees the most creation taking place. In April, 55,360 tokens were created on BSC, making up almost 50% of the entire token creation. The BSC testnet also follows this trend with 41,186 tokens created. Combined, it sees the most activity out of any network, making up more than 80% of all new coin activity.
BSC is favored because of its cheap fees and the fact that it’s easy to create a token. Additionally, it also boasts a large number of investors and a user base that is more willing to invest in untested assets. This makes it a favorite among developers who are looking to create a new coin.
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Ethereum sees the second-largest volume of coins created, with 5,946 tokens created in the month of May. Polygon follows this with 4,323 tokens. While other networks saw less than 2,000 tokens created. BSC still remains in the lead with 28,224 tokens created and 26,753 on the BSC testnet.
What this indicates is that the bear market is beginning to affect the profitability of these new coins. With prices so low, investors are less likely to want to risk investing in untested projects and the majority of these new tokens are doomed to fail as a result.
Featured image from Quora, chart from TradingView.com
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