The crypto industry is a rapidly evolving space, with numerous projects being developed every day. Initial Coin Offerings (ICOs) are a great way to be an early adopter of a new project. Later when the project grows and reaches new heights, we can enjoy the benefits of being an early supporter. But, before directly participating in ICOs, it is important for you to know how to invest in an ICO and its pros and cons.
What is an ICO?
Initial Coin Offering (ICO) is a fundraising mechanism for cryptocurrency and blockchain projects. Startup crypto projects sell new cryptocurrencies in exchange for other cryptocurrencies or fiat money and raise funds for further development of the project. Even though ICOs work similarly to IPOs in the stock market, there is a clear difference. By participating in ICOs, you will not get ownership or a share of the project or the company.
Advantages and Disadvantages of Investing in ICOs
ICOs have a lot of benefits both for the companies and investors. However, they are also certain risks, which are worth considering before investing in ICOs. Let’s walk you through some of the pros and cons of ICOs.
Advantages of ICOs
- It is a great way to invest early in a project.
- ICOs allow you to make huge profits in the long term.
- You can buy cryptocurrencies at discounted prices if you invest in ICOs.
- It is a fast and efficient method to raise funds for a startup crypto project.
- There are no restrictions to participating in an ICO. Anyone can participate in ICOs effortlessly.
- Crypto startups can raise a lot of funds in the early stage.
- The new project can reach a global audience with the help of ICOs.
- You can directly invest in the new projects without any middlemen.
- Participants can enjoy the benefits of being early adopters.
Disadvantages of ICOs
- Most of the crypto startups have low success rates, and the cryptocurrencies are volatile. Hence, there is a significant risk that a project will lose its value.
- If the project becomes unsuccessful, the funds you invested in the ICO will be worthless.
- Searching for a reliable project that has a huge potential is highly difficult, as numerous projects are being developed every day.
- ICOs are not regulated. There is a high possibility for an ICO to be a scam.
- Without a clear understanding of the crypto space and knowing how ICOs work, it is not advisable for new users to invest in ICOs.
How to Buy ICO Tokens
Before investing your hard-earned money in ICOs, you need to search for quality projects with a strong background. After finding a good project, you need to learn how to participate in ICOs. This step-by-step procedure helps you understand how to buy ICO.
Step 1: Register of the ICO
The legit and quality projects will always have a website to raise funds, which also helps you to understand the details of the project - goals, team, etc., and the details of the ICO event - the amount they are raising, token value, and the timeframe. The website also helps you perform due diligence and find all the details about tokens and security measures.
Once you find a legit project, you need to sign up or register yourself on this website to participate in the ICO. While some projects allow you to participate in the ICOs through websites, others prefer using crypto exchanges. The registration procedure may vary from project to project, but you can always find the instructions on the website and other press releases. Follow the registration procedure carefully by reading the instructions to register for the ICO.
Step 2: Set aside some funds to buy ICO
After registering, you need to prepare the amount you would like to invest in the ICO. Go through the instructions and find out the maximum and minimum limits and types of funds that you can invest. Some ICOs that are conducted on exchanges accept fiat currency, but most of the ICOs accept cryptocurrencies like Bitcoin and Ethereum. Since Ethereum is a platform for developing several new projects, there is a chance that some projects accept Ether in ICOs.
Step 3: Get a separate crypto wallet
You would need a separate crypto wallet that supports the ICO tokens. Instead of using a wallet provided by a crypto exchange, it is best you get a separate crypto wallet. There is a famous proverb in the crypto community - “not your keys, not your coins”, which means if you do not hold the keys of your wallet, the funds stored in it may not belong to you. Hence, get a separate crypto wallet to pay for and store the ICO tokens. After getting the crypto wallet, move your funds to it.
Step 4: Transfer your funds and Buy ICO tokens
After registering and setting aside the funds in the crypto wallet, the next step is purchasing the ICO tokens. Follow the detailed procedure provided on the project’s website and transfer your funds to their address. There is a high chance of encountering fake websites and fraudulent wallet addresses at this step. Check the project’s website address and the wallet address multiple times, and be careful before moving the funds.
Step 5: Receive and store the tokens
After moving the funds successfully, you will receive the ICO tokens to your wallet address. If there is any delay, make sure you get in touch with the project managers and be up-to-date. When there is network congestion and high traffic, you might get the tokens after a few days. If the ICO event took place in an exchange, and you received the tokens to your exchange wallet, make sure you move them to your separate crypto wallet.
Once you receive the tokens, it is time to store them securely. Stay up-to-date with the project’s development and new releases because most of the projects provide early-bird benefits to the ICO participants. You would need to hold the ICO tokens until they got listed on centralized or decentralized exchanges.
When to sell your tokens
After you acquire the ICO tokens, it is important for you to make sure you make the most out of that investment. If you understand the project and have a clear vision that it has a long-term value, then it is better you hold the tokens. But, if that is not the case, and you would like to make a profit as soon as possible, you need to sell the tokens when the price goes up.
During an ICO event, only a few people get the opportunity to buy the tokens at a discounted price. When the tokens get listed on exchanges and marketplaces, the demand for the tokens increases, and the price rises; this is the best time to sell the tokens on exchanges and make profits.
Start Investing in Cryptos Today
Cryptocurrencies are a great way to generate income in multiple ways - trading, staking, lending, automated-market making, yield farming, etc. It is never too late to invest in these virtual currencies and make your money work for you. If you are a beginner start investing small amounts in the standard cryptocurrencies like Bitcoin and Ethereum. If you need any help with finding the best crypto exchange, visit our crypto exchange compassion tool and find out the best crypto exchange suitable for your needs.
Yes. Anyone can invest in an ICO. All you have to do is follow the steps presented in this guide
It can be profitable. Investing in ICOs is profitable only if the project becomes successful. If it doesn't, you'll most likely lose your money.
You can invest in ICOs through the project’s website.