Over 800 cryptocurrencies are now dead as bitcoin is 70 percent off its record high

  • Over 800 cryptocurrencies are now dead and worth less than one cent.
  • New digital tokens are created through initial coin offerings but some of these projects have been scams and many have not materialized into real products.
  • Bitcoin has fallen roughly 70 percent since its record high near $20,000 last year, adding to bearish sentiment around cryptocurrencies.

Cryptocurrency projects have been popping up left, right and center in the past 18 months, but over 800 of those are now dead, adding to comparisons between the current digital coin market and the dotcom bubble in 2000.

New digital tokens are created via a process known as an initial coin offering (ICO) where a start-up can issue a new coin which investors can buy. The investor doesn't get an equity stake in the company, but the cryptocurrency that they buy can be used on the company's product. People usually buy into an ICO because the coins are cheap and could offer big returns in the future.

There has been an explosion in ICOs. Companies raised $3.8 billion via ICOs in 2017, but in 2018 so far, this number has already shot up to $11.9 billion, according to CoinSchedule, a website that tracks the market.

However, hundreds of these projects are now dead because they were scams, a joke or the product hasn't materialized. Dead Coins is a website that lists all the cryptocurrencies that fall into those categories. So far, it has identified just over 800 digital tokens that it considers dead. These coins are worthless and trade at less than 1 cent.

Bitcoin, which is the biggest cryptocurrency by market capitalization or value, has also had a tough year. The price of bitcoin has fallen roughly 70 percent since its record high near $20,000 last year, according to CoinDesk data. The big plunge in bitcoin's price has has drawn comparisons with the Nasdaq's sharp fall in 2000 and the failure of many cryptocurrencies has been likened to some of the companies that crashed during the dotcom boom.

Some of the recent bearish sentiment came after two South Korean cryptocurrency exchanges were hacked.

ICOs are incredibly risky investments and there is a lot of fraud in the space. Earlier this year, CNBC reported on a scam ICO called Giza. The fake start-up ended up running off with $2 million of investor money. Still, many advocates see a future for ICOs as an alternative to initial public offerings and venture capital funding.

Cryptocurrencies have come under a lot of pressure but there's still optimism that regulators could look more favorably towards them and that could boost participation in the market. Arthur Hayes, CEO of cryptocurrency exchange BitMEX, told CNBC's "Fast Money" on Friday that bitcoin could climb to $50,000 by the end of the year.

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