✔️ Information reviewed and updated in May 2024 by Eduardo López
Within the world of cryptocurrencies, there are different terms that you should know, since these are essential to make good decisions. A perfect example is the term ICO which is widely used today to describe one of the most important processes of a virtual currency.
ICO or Initial Coin Offering is a word that you will hear a lot and that you should know everything about if you want to make better investments. That is why here we will tell you everything you need to know about what is a cryptocurrency ICO.
✨The definition
The term ICO is the initials of Initial Coin Offering or initial offer of cryptocurrency for its translation into Spanish. Basically it is summarized as the initial collection of money (funds) to finance the launch of the cryptocurrency. It is as if you had a Crowdfunding or financing, but only for that digital currency.
Generally this type of collection is launched with the aim of being able to develop the cryptocurrency on a larger scale and be able to position it in the market for it to be listed. In exchange for your participation in an ICO, you receive as a reward the new virtual currencies in advance from the developer.
✨ What are the benefits of participating in an ICO?
- Exclusiveness: For many experts, participating in an ICO gives you a certain degree of exclusivity, since you are accessing cryptocurrencies that are not yet on the market. This means that you can have them before anyone else.
- Highest reward: When you participate in an ICO, most developers tend to give you more crypto for your money which is a great advantage if you compare this with buying them in the market. They do this as thanks for having trusted their proposal from the beginning, although of course, as everything has its dimensions.
- Return of investment: You should know that, although there is risk in an ICO, we will talk about this later, the value is usually very attractive. According to analysts, the value of your investment can be multiplied by 10 if the initial offer is successful. In addition, to that we must add the growth of the cryptocurrency by itself.
- Cryptocurrency growth: Not only will you be able to receive a x10 increase in your investment, you will also have the growth of the value of the cryptocurrency in your favor. This can rise at least 30% after an ICO so the return on investment and performance are usually significant.
✨Risks of an ICO
There is great risk when it comes to investing in an ICO. The first is that it is just a scam where investors are only looking to raise funds and then disappear. There is also the risk that the cryptocurrency does not have a project behind it, so it lacks sustenance.
Another risk is that the cryptocurrency will never be listed in a broker, which could make it impossible for you to sell it even if it is worth millions. In addition, there is the human factor with miscalculations, for example. Although all this can be fixed with good research.
✨Phases of participation in an ICO
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whitelistingg
In this process, investors register to set aside their place in the ICO. Many times, you just have to fill out a form with your information and send a copy of your identification to ensure that it is you.
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Public Pre Sale
Once the list is filled, a pre-sale is launched for those who registered in it in which investors access preferential prices and better bonds. Of all the ICOs, this is when there is the most opportunity to obtain better returns on your investment.
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crowdsale
Here, the sale of bonds or investment is open to the public so that anyone can participate in the ICO. The most common is that developers set an investment or participant cap to prevent this collection from getting out of hand.
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Token Distribution
Once the previous process is finished, the developers will send the tokens corresponding to your investment to your Wallet. These Token will later become the cryptocurrency itself, so it is necessary to keep them safe if we do not want to lose our money.
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Exchange trading
Finally, the cryptocurrency goes public on the different exchange platforms. This is when you can sell it and recover your investment, as well as generate returns. Take into account that everything will depend on the law of supply and demand, so it is important to consider this to understand the sale price.
✨ Points to look at when participating in an ICO
- Project quality: To avoid investing in a project that is a scam or lacks sustenance, it is advisable to know the project thoroughly. Delving into it, the cryptocurrency and even the developers is very important.
- Blockchain: If you don't want to participate in a SCAM (ICOs that turn out to be fraudulent or junk) We recommend you take a look at the Blockchain that will make up the cryptocurrency. This is because the type of Blockchain can give you a premonition of what the virtual currency will be like once it is created.
- The partners: As we anticipated in the first point, taking a look at who the developers or partners of the project are is very important. This is because many times, People with a bad reputation can participate in the creation of ICOs, which can bring down the whole project.
- The bonuses: If everything has gone OK in the previous point, then you can take a look at the bonuses or rewards offered in the ICO. Remember that in the initial stage of Whitelisting and presale, the best bonuses are usually offered. There is even data that shows that the benefits decrease between 20 to 50% after this stage.
- Whether or not it will quote: Finally, do not forget to review the cryptocurrency, after its ICO, it will be listed on exchange platforms or not, since this is essential to recover your investment. If they are not listed on a broker, you simply will not be able to sell your cryptocurrencies.
