Crypto Winter’s First Victim; NEM Foundation Crumbles as XEM Coin Price Sinks
The crypto winter may just have claimed its first major victim as the NEM Foundation announced it would be suspending all projects and partnerships due to the tumbling XEM coin price.
Despite organizational restructuring, and an agreement to cut its budget by 60%, the foundation admits to having enough funds to operate for just one more month.
Within hours of the announcement on Thursday the XEM coin price sunk to a new 22-month low in the low four cent range – a 97.9% reduction since the ATH; although new lows were being struck all throughout December and January.
Several crypto enthusiasts and NEM followers have questioned the wisdom of leaving it until thirty days before possible destruction to break this news. While some are already screaming ‘Exit Scam!’, the foundation, headed by newly appointed president, Alexandra Tinsman, says it will be working hard to ensure the longevity of the NEM community.
Crypto Winter Tests Logic
“In terms of running an effective organization, the existing structure failed. Maybe that didn’t seem like a big problem when the XEM price was high, but it’s a very big problem as we seek to sustain a viable organization in the ‘Crypto Winter.’”
As suggested in my recent article, ‘5 Things Crypto and Blockchain Investors Should Beware of in 2019’, many of the incentive structures put in place at the height of the bull market are going to be severely tested here in the bear.
Admittedly I was referring to block producer and miner rewards, but the NEM news also brings to light the crazy spending being carried out by the community groups who develop and push these cryptocurrencies. More from the announcement:
“The reality of having one month left in funding means we won’t be able to support our current headcount, partnerships, and projects. We need to put everything on hold. This is painful since it hurts good people and partners.”
The NEM Foundation board was recently radically restructured, and the new board members say they cannot apologise for the irresponsible behaviour of previous stewards. However, they admit that spending reached as high as 9 million XEM per month. That would have been worth close to $0.75 million in December, and $1.5 million per month back in July.
“We saw a lot of talented people who were working hard, but not aligned with the same goals. We saw efforts being duplicated, and inconsistent metrics of success. We saw very little accountability for funds and questionable ROI, leading to a burn rate of 9 million XEM per month.”
Cynicism was abound on Thursday, with one Redditor commenting:
“Wow so they decided to tell everyone when there’s only a month left of funding. They knew their burn rate but kept it till the last minute. #ExitScam.”
New president Alexandra Tinsman has reportedly submitted a community request to the foundation for XEM funds equating to a dollar value of $7.5 million. It is said that these funds will be used to save the foundation from the edge of bankruptcy. (NOTE: This news was reported via prominent news outlets, but was notably absent from today’s internal forum announcement).
Unfortunately, if an exit scam is in the works, it may be difficult to tell it apart from the general sell-off. By Thursday morning XEM was dropping like a stone, while trade volume rose to its highest in almost three months.
NEM Price – XEM/USD
XEM was down over 9.9% by Thursday morning, falling from $0.048040 down to $0.043284 – a new 22-month low that stretches back to April of 2017.
That’s a crazy drop for a coin which once appeared to be one of the major players, and maybe even a possible ‘Ethereum Killer’. Just one year ago, NEM was valued at a market cap of $18.8 billion. Yes, billion. Today, that cap is closer to $400 million, and a coin that once contended for a top ten spot is now close to slipping out of the top twenty.
Perhaps worryingly, only around 7% of daily trades came against USDT, with traders instead apparently opting to cash out for BTC, ETH and JPY.
So… Is NEM Finished?
Not right now anyway, but losing the beating heart of the coin’s community cannot be a good sign. Just think of all the Dash news we’ve heard in the past year, then consider how much of that would never have reached our ears if it weren’t for the community payouts which incentivize people to actually get out and do things.
The foundation ended their glum announcement with a positive look to the future, and a reference to the upcoming launch of Catapult – a new blockchain ‘engine’ that they say will eventually replace the current core NEM engine:
“We are optimistic about the future of the NEM Foundation under its new council. With a laser-focus on our mission-critical goals, we are positioned to remain an industry leader through this ‘Crypto Winter.’ The upcoming launch of Catapult will revolutionize blockchain’s future, and we are grateful for your support in the next steps of this journey.”
How much good the prospect of Catapult will do for NEM’s market sentiment is unclear. The XEM coin was already almost forgotten in major media circles before the crypto winter took hold. Now its spiral has accelerated.
Start of a Trend?
Another of my predictions for 2019 was that many coins that we’ve come to know and love, would eventually roll over and die.
While NEM still has some life in it yet, one can’t shake the feeling that as the bear market extends even longer, and falls even deeper, numerous coins and tokens are going to crumble under their own weight.
I expect we should all get used to reading obituaries which read something like: ‘Here lies ____ (__), which fell in the crypto winter of 2019’.
Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock.