Many people lament not buying Bitcoin while it was still $10 or even $1 per coin; however, this is too modest. If you’re already fantasizing about making a great investment early on, why not go even further and buy 10 Bitcoin for $1? Why even stop there?
While this may sound like too much of a fantasy, the truth is that some people did make this decision. Whether or not they kept Bitcoin when it reached $60k is another story, but it is possible to recognize the next big crypto and buy vast quantities of it for a bargain price.
All of this is much easier when you understand ICOs and presales. So, to help you pursue your dream of becoming a crypto millionaire (but not necessarily a USD millionaire!), here’s what these two concepts mean and what you can do to take advantage of this knowledge.
What are ICOs?
Many people assume that cryptocurrencies just come into existence with several strokes of the keyboard. This is due to their lack of basic understanding of the complexity of these blockchain processes and crypto development. Developing a new cryptocurrency takes incredible resources, so most developers struggle with fundraising.
Normally, when making a new asset, a company would take a loan, but since cryptocurrencies are mostly unregulated and these firms lack conventional assets, they don’t have much collateral. This is why their only choice is fundraising.
This is exactly what ICOs are. The Initial Coin Offerings are like presales these crypto development teams use for fundraising. They offer their coins at a bargain price so that they can pump this capital back into their development. The more successful this crypto presale, the bigger the potential of the crypto.
So, ICOs are just crypto presales, right? Well… not exactly.
What’s the difference between crypto presales and ICOs?
Now, while all ICOs resemble the conventional presale mechanics, not all crypto presales are ICOs. With that in mind, what’s the difference between crypto presales and ICOs?
The biggest difference is that crypto presales are more exclusive; while ICOs are open to the public, crypto presales usually target a small, specific group of investors. In other words, a crypto company hopes to get larger funds from fewer (large) investors.
Now, the fact that ICOs are open to the general public doesn’t mean anyone can buy them. There are some restrictions and requirements that the buyers usually have to pass. For instance:
- They have to verify their age
- Have an accredited investor status
- There may exist a geographical restriction
- They may have to pass a whitelisting process
In other words, ICOs are public, while crypto presales are usually more exclusive projects (although this is not always the case). Still, seeing as how the technical nature of these two processes is so similar and that they serve the same purpose (for both the developers and the investors), it’s easy to see why so many people confuse them.
Benefits of ICO and crypto presales?
As we’ve already stated, ICOs and crypto presales serve the same purpose. Therefore, it would be fair and accurate to discuss their advantages/disadvantages in the same group. These advantages have two massive categories – advantages for project creators and benefits for investors. So, let’s see what each of these has in store.
Benefits for project creators:
- Access to much-needed funding: Bank loans and venture capital are incredibly difficult to secure when you’re in the crypto business. This is why ICOs and crypto presales are the best way to ensure these much-needed funds.
- Building a community: Cryptocurrencies heavily depend on their communities. Communities shape trends, which is exactly why a concept like a meme coin can work and be lucrative. This way, you’re laying a foundation for the future community and testing the market simultaneously.
- Token liquidity: Without liquidity, token holders can’t buy, sell, or trade their tokens. By preselling tokens, the creators are actively creating liquid assets.
Benefits for investors:
- Investment opportunity: Cryptocurrencies are assets; if you can buy them low and their value increases, the benefit of this concept is self-explanatory.
- Chance of early adoption: The sooner you get into an investment, the greater your payoff will be. When people start making money on something, it’s probably already too late to invest.
- Trading opportunities: Since crypto are, for the most part, volatile, this creates a great opportunity for day trading.
One difference between crypto presales and ICOs (for investors) lies in a low initial capital requirement. This means that you can potentially take a small amount of money and turn it into a fortune in the near future, but it all depends on the success of your chosen coin. Just remember our argument from the start of the article – imagine buying ten Bitcoin for $1. You get the idea.
ICO and crypto presale tips and strategies
If you decide to buy in an ICO and participate in crypto presales, you should do some things to get the most out of your decision.
- Read their whitepaper: Every crypto project has a whitepaper outlining the technology concept. Some tokens have a utility, regardless of whether it’s AI or green power. Carefully read the whitepaper to understand what’s going on.
- Check community and reputation: Interact with other people who had contact with this particular token. Sometimes, you can use the knowledge of those who did their research.
- Inquire about the team behind it: You can always check the personal brands of the teams behind this crypto. Where did they work before, and what’s their track record?
- Understand the tokenomics of the project: Each token is an ecosystem. Before investing, check some peculiarities like the token supply, distribution, and governance. Like before, pay attention to the utility of the token in question. For instance, digital money is getting increased use in the oil industry, so the ICO in question may have the intent to join this market.
- Check their roadmap and progress: Project developers are supposed to present a roadmap. Here, you can examine the progress of the project.
- Evaluate risk-reward ratio: Like any other investment, assess the risk-to-reward ratio.
Crypto is volatile, and investing in these assets is still risky. Still, they’re not different from any other volatile asset, and the potential for the payoff is significant. Just be careful, don’t spend money that you can’t afford to lose/freeze, and do your research.
