An ICO, or Initial Coin Offering, is hybrid of IPO (Initial Public Offering) and online crowdfunding, but for cryptocurrency. You contribute a certain amount of an existing cryptocurrency, like Bitcoin or Ether, and in return for your contribution, you get a certain amount of new crypto coins at a date specified by the issuer of the token. Potential investors usually choose to exchange current cryptocurrency for yet to be released token in hope that its value will increase significantly after a successful launch. On the other hand, it is a quick and effective way for startups to raise capital that is needed to introduce new cryptocurrency in the market. However, ICO may yield fantastic results, but your ICO marketing strategy will play a huge role in determining its success.
Potential investors and common people should also understand that cryptocurrency trading and its use is legal in most developed and developing countries of the world. However, there has been growing concerns from various state governments regarding its trade and it still remains unregulated, which often boosts shady transactions and high chances of scams. Recently, China has banned ICOs and one must be extra vigilant with ICOs because they are in a gloomy territory in terms of legality. They could get banned in the future, so read the white paper carefully and do a careful research about the project because some of these are scams.
Tip 1: One important thing to keep in mind is that you can buy ICO tokens after their launch, and that too at a lower price than what was offered during ICO phase. For this to happen, you’ll have to be savvy enough. Many ICO token have fared well over time, but only selected ones have consistently maintained higher ICO price during the initial months of the launch.
Tip 2: Potential investors should understand the basic but important difference between ICO and IPO so as to take a well-informed decision. Unlike IPO, you buy digital coins in ICO. In IPO you end up buying stock in a company, and investment in a new company is rewarded with assets related to the value of the company.
Tip 3: Not all ICOs launched are reputable, and of the reputable ones, only limited will taste success. Investing in ICOs is even riskier than investing in the coins with highest market caps and altcoins with low market caps. Be prepared for some disappointments in the form of not getting desired returns on ICO investments.
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