- A high-profile crypto coin backed by prominent venture capital investors has plunged 95% since it launched in May.
- At the time Internet Computer launched, it was one of the 10 most valuable cryptocurrencies.
- “A token dropping over 90% in the first month after launch is highly unusual for a project of this scale,” Miguel Morel told the New York Times.
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A high-profile cryptocurrency called Internet Computer made waves when it debuted last month as one of the 10 most valuable cryptocurrencies, sporting a market capitalization of nearly $72 billion at its peak.
But just one month later, Internet Computer plunged about 95% and is now worth just $5.7 billion, according to data from CoinMarketCap.
The swift decline of Internet Computer has puzzled many, given its high-profile status and backing from big venture capital investors like Andreessen Horowitz.
Internet Computer is a project of Dfinity Foundation, a nonprofit organization founded by Dominic Williams. The crypto project was designed to help facilitate a decentralized layer of web infrastructure that doesn’t rely on solutions from internet giants like Amazon and Alphabet.
“The technically complex network would make it easier for people to build software and publish directly to the internet without going through the tech giants’ platforms,” The New York Times explained.
But amid Internet Computer’s initial coin offering last month, “something went wrong,” Arkham Intelligence founder Miguel Morel told The Times. An analysis by Morel found that Dfinity allowed the treasury and insiders to send billions of dollars of Internet Computer to exchanges.
“A token dropping over 90% in the first month after launch is highly unusual for a project of this scale,” Miguel Morel told the New York Times.
Morel found 44 “probable insider addresses” that deposited 10 million Internet Computer tokens to exchanges following the coin offering in May, which gave the impression that they were transferred for trading, not safeguarding. The transfers made by insiders coincided with large drops in the price of Internet Computer.
At the same time, according to Morel, Dfinity made it extremely difficult for their longtime supporters to access the tokens they were promised. While the price declines were happening, small investors who were left out of the process were stuck, The Times reported.
According to Morel, Dfinity gave complicated instructions for small investors who bought Internet Computer tokens when they were cheap during a 2017 crowdfunding round. The buggy process was hampered by limited customer support. Morel called Dfinity’s approach “unnecessarily complicated.”
In a statement, Dfinity blamed “day traders with alternative agendas and unethical crypto projects” for undermining its project, and said that the initial supply of Internet Computer was moved to a custody account at Coinbase for transfer to various investors.
While some have chalked up Internet Computer’s spectacular downfall as bad luck, given that it debuted amid a crypto-wide meltdown, Morel said that the token’s decline was more serious given that it has plummeted more than Shiba Inu Coin, a joke cryptocurrency that is making fun of another joke cryptocurrency.