The world of cryptocurrency ICOs has been on fire as of late. In most cases, these ICOs cause quite a bit of strain on the Ethereum network, which is anything but enjoyable. It now appears a lot of projects are running so-called pre-ICO token sales as well. This allows teams to collect even more money, while investors get cheaper tokens.
2. Cryptocurrency ICO
The concept of a cryptocurrency ICO has been documented quite a few times already. In fact, we have a whole series on this particular market phenomenon, which covers most of the information people need to know. Although investing in a cryptocurrency ICO can be quite lucrative, it is taking longer for tokens to get listed on decent exchanges. This causes a lot of users to get quite nervous about their investment, which is understandable.
This brings us to how cryptocurrency ICOs are currently developing. The money is raised a lot quicker compared to how much time it takes to sort out technical issues, refunds, and getting listed on exchanges. To a lot of people, this makes no sense, especially when projects raise over $10m during their ICO. Surely they could use that money to speed up the listing process and make investors a lot happier? Unfortunately, that is not how things work right now.
Contrary to what most people expect, there is a lot more to getting listed on an exchange than just paying a fee. Especially where ERC20 tokens are concerned, as smart contracts need to be audited by a third party. This causes some delays, which means some investors will panic sell on smaller exchanges as a way to minimize losses. If this trend keeps up, a lot of ICO projects will go under well below they even get a listing on Bittrex or Poloniex. That is very unfortunate, to say the least.
1. Pre-ICO
This brings us to a somewhat newer phenomenon, which is known as a pre-ICO token sale. As the name suggests, a pre-ICO allows investors to buy tokens before the official crowdsale begins. In most cases, these pre-ICOs raise a much smaller amount of money, and offer tokens at a lower price with a substantial bonus. More specifically, finding a pre-ICO with a bonus of 40% or more compared to the ICO price is not all that uncommon.
It is worth noting a pre-ICO often uses a very different smart contract compared to the actual ICO itself. This is done to separate funds and ensure these is no confusion. However, it can also create some uncertainty regarding how much money has been raised in total. Since the pre-ICO numbers are not included in the actual ICO numbers, there can be some sort of a discrepancy. Plus, it also means there may be far more tokens issued than people initially assume.
When a project launches a pre-ICO token sale, they need to do their due diligence. Being transparent about the money raised and the number of tokens issued is of the utmost importance. One negative side effect of pre-ICOs is how early investors often sell at ICO prices once a token hits an exchange. In doing so, they still make a very big profit and cripple the token’s price in the process. A pre-ICO is an amazing investment opportunity for a quick buck, but it can hurt the project’s appeal and credibility when large amounts of tokens are sold at bottom prices.
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