Cryptocurrency presales which are often referred to as Initial Coin Offerings (ICOS) are opportunities to purchase a new type of cryptocurrency before its release. Whether you’re new to the world of crypto, or an experienced trader, you’re probably wondering if this is something you should be getting involved in. This article is going to help you decide and explore more about cryptocurrency presales and the pros and cons that come with investing early.
The purpose and structure of cryptocurrency presales
You’re probably wondering why many digital currencies have presales before their release. And the answer to that question is that there are a few reasons why there are cryptocurrency presales for new coins. These include:
Raise initial capital: Presales raise funds for the currency which helps go towards development, marketing and any operational expenses that come with releasing a new currency.
Size up market interest: It’s also a great way to see what kind of interest surrounds the new currency. This can be valuable information when it comes to recognizing their audience and in turn, adjusting their strategies and development plans to fit their investing audience.
Build a community: This is the start of building a loyal customer base, creating a community of advocates and influencers who can help a currency promote their brand and product.
Achieve early adoption: Early investments can help to move a project along a lot quicker, so why wait? In this case, the earlier the better which can help a smoother transition to more users accepting the token once it has officially launched.
How do presales work?
A presale will work slightly differently, depending on the token, as well as the direction and approach the project is taking. However, most tokens will go through several stages including:
● Pre-announcement phase: This is where all the magic happens. The token’s team will work on developing their whitepapers, which detail the projects’ goals, technology and the tokenomics (this refers to the overall economics of a specific crypto token). During this time, a team might also be already working to create a buzz around the new token on social media, online forums and crypto platforms.
● Private sale: At this point, usually a presale will begin but only be offered to a select group of investors. These are often venture capitalists, industry insiders and sometimes even influential figures. Private sales are usually smaller investments, but come with bigger discounts.
● Public presale: This is when the presale is open to the public. Again, at this point, investors will see discounted prices for the token.
● Token distribution: Once a presale ends, the tokens are then distributed to those who have purchased them. Depending on the token, this may be instant or be completed in a specific amount of time, depending on the progress of the project. If there is a wait, investors are informed about this before purchase.
● Exchange listing: And finally, after the presale tokens have been distributed, it’s time for the token to be released officially. During the process, a team will then be looking to list the tokens on cryptocurrency exchanges.
The risks and rewards of purchasing ICOS
There are both pros and cons when it comes to investing in ICOs, potential risks and rewards. It’s important to consider these before investing.
Investing in ICOS can also come with a number of potential risks including:
● Lack of regulation: Most presales operate in a regulatory gray area. This lack of oversight can increase the risk of fraud, mismanagement or even project failure. This means that investors must be cautious and conduct thorough research before participating.
● Market volatility: Cryptocurrency markets are known for their volatility. Even if a project is promising, market conditions can drastically affect the token’s value, leading to potential losses for early investors.
● Project viability: There’s also the risk that the project may not achieve its goals or could face unforeseen challenges. Factors such as technical issues, market competition or poor management can impact the project’s success.
● Token liquidity: Tokens acquired during a presale may not be immediately tradable. This will depend on the project and is something investors should be aware of before investing in an ICO.
However, investing in ICOS can also come with a number of potential and attractive rewards including:
● Exclusive benefits: You may find that some presales come with additional perks such as bonus tokens, exclusive access to new features, or governance rights within the project’s ecosystem.
● Discounted prices: One of the more attractive attributes of ICOs is that you’re able to buy tokens at a much lower price. This can be a great investment opportunity and potentially lead to significant returns if the project release is successful.
● Early access: Investors who invest early can benefit from a token’s growth and development from the outset.
How to approach ICO investments
It’s clear from this article that investing in ICOs can be a great opportunity, but can also be a risk. Therefore if you choose to invest, it’s important to be aware of the risks and approach cautiously. It’s crucial for investors to have some practices in place to protect themselves. These include:
● Research the team
● Evaluate the Whitepaper
● Check for regulatory compliance
● Engage and discuss with the crypto community
● Assess the Tokenomics
