Raheem Kassam, a former aide to Nigel Farage, has quit the race to become Ukip leader three days after launching his campaign in a Westminster pub.
Mr Kassam said he has realised "the path to victory is too narrow" and urged his supporters to back former London mayoral candidate Peter Whittle.
His announcement comes with nominations for the Ukip leadership set to close at noon today.
In a statement, Mr Kassam said: "As of today, I am formally suspending my campaign for Ukip leader.
"After much consideration, I have decided not to pursue my campaign to be Ukip leader any further.
"This was a very difficult decision, and I want to thank everyone who supported me in the process.
"It is a decision I have not taken lightly, but following meetings this weekend I realised the path to victory is too narrow.
"I would encourage my supporters to back Peter Whittle, who I think would make a fantastic leader of the party."
Mr Kassam revealed that he has not raised enough money for his leadership bid to be any more than a digital campaign based in Westminster, although he had enough funds for his deposit.
"To not feature at events all around the country would have made me a hypocrite, given how much I criticise the establishment for ignoring the country," he said.
He will encourage donors to choose what happens with the remainder of the campaign funds, suggesting either donations to the Royal British Legion or Help For Heroes charities, or donations to Ukip or Mr Whittle's campaign.
"Those who want refunds are welcome to contact me", he added.
Mr Kassam, who edits the right-wing news website Breitbart London, also complained of "disgraceful treatment by the media" and accused Ukip of treating the leadership election "like a coronation".
He said he has complained numerous times to Ukip chairman Paul Oakden about MEPs using party databases to "effectively campaign against me", insisting it was "ostensibly against the rules".