As the popularity of cryptocurrencies around the world is rising, more and more financial strategies are developed in order to suppress blockchain-related uncertainty. Although predictions about the future of the digital currency market are hopeful, still many fraudulent schemes concern investors all over the world and make them think of something more reliable. If you are involved in the world of cryptocurrencies, probably you’ve heard the acronym ICO somewhere which stands for Initial Coin Offering. This strategy shows how funds are increased for a new crypto deal.
ICO is pretty much like an IPO or Initial Public offering which raises funds when a new company enters the stock market. Usually, when a new firm goes “public” it’s called an IPO. This is when they sell shares to anybody who wants to buy them. An ICO is pretty similar but instead of shares, they sell their coins. Therefore ICO and IPO are quite different strategies and in fact, ICO’s tokens are the same as the stocks for the exchange market.
The renaissance era for the ICOs was in 2017 when this strategy was really popular because it was the time when most of the cryptocurrencies increased in price. Although things have changed after that, it is still believed as a promising new phenomenon that may conquer the tech world and change the way startups increase the capital. Today as foreign exchange market experts believe ICO has the potential to replace initial public offerings (IPO), crowdfunding, or even trying to reach for assistance and influence from venture capitalists.
Many things keep the ICO market driving and make ICO one of the most effective marketing strategies nowadays but of course, it doesn’t mean that there aren’t some ICOs that have been overrated at best or criminal at worst. There are many occasions when scammers announce an ICO, sell their coins, and then disappear without working on the project and earning people’s profits. This is the case with traditional finances as well. If we take a look at the worst FX brokers, we can see that there are lots of scammer brokers online, questioning the strategy of IPOs, providing customers with unreliable service, and putting their safety at the risk.
Just like this, today there are many types of fraudsters related to ICOs and therefore, investors are risking their funds when they invest in this kind of crypto venture online. According to Reuters, they are frequently attacked by cybercriminals that try to steal money from ICO projects. Because of related risks and confusion, ICOs are now banned almost everywhere and have been replaced with IEOs (Initial exchange offering). But even with these many scammers, regulations, and uncertainty, ICOs are still alive and are considered as one of the most successful marketing strategies.
What makes ICOs successful?
ICO is related to blockchain technology and is especially popular among startup companies as it helps them raise capital and develop beneficial projects. ICO releases a share of their total supply to get funded with cryptocurrencies like Bitcoin, Ethereum, or fiat money. AS new data suggests, this strategy is slowly replacing the traditional method of initial public offerings as it has certain advantages which may be the most important reason for its success. The empirical evidence shows that one of the main reasons why ICOs are thriving today is the ability to resell the received tokens at a higher price, as well as the chance to obtain the firm’s services at lower prices. Another important thing is the ever-rising popularity of cryptocurrencies which are strongly related to the success of every single ICO. But also, the triumph of these markets is also connected to the fact that people expect those initial coin offerings to be beneficial for them, as they are anonymous and attract initial investments at a high speed of transactions.
However, because there have been difficulties in regulation, now the ICO market attracts a smaller amount of investments and chances to be manipulated in the market are higher. This is exactly the fact why the results which are relevant to the IPO market can’t be directly applied to ICO.
Because of the related risks, some experts believe that sometimes ICOs are at the risk of being replaced by IEOs which is actually a type of ICOs operated directly by crypto exchanges. What happens here is that a company approaches a crypto exchange and tells them they would like to list their coins with them. The exchange takes a look at the team, at the coin, and the project, and approves it if everything is ok. So in this case, investors get this extra protection that the exchange approved the project, so it should be good. But with initial coin offerings, there are more possible dangers. But still, the strategy has so many advantages that today it’s referred to as the best way for businesses to raise funds through cryptocurrency coin creation.
What are the benefits of ICOs?
Initial coin offerings have various advantages especially for business owners that are looking for favorable opportunities. First of all, anyone who has the possibility to buy an ICO token while taking part in IPOs is limited to investors with over $1 million in net worth. However, when it comes to ICOs the purchases are anonymous so tokens sold at ICO can be sold to anyone. Another benefit is that these tokens can be sold globally and therefore, this strategy provides chances for global investors to invest in new coins, and they are always ready and open for operation.
Considering the fact that token economy liquidity varies drastically in an IPO, another great reason for ICOs’ success is the value of its token that sits freely inside an always accessible marketplace, available 24/7 worldwide. Also, there are no third parties when it comes to ICOs, and buyers and sellers can contact without any intermediaries. Specifically, once crypto is created, it can be instantly sold on the market. Besides, because of the impressive decentralization, ICO tokens can be launched anywhere in the world which makes the strategy pretty convenient.
Therefore, many reasons keep the ICO market driving and the role of the market characteristics itself is pretty much obvious in its success. For businessmen who try to establish new firms and seek funding, ICOs are probably the best opportunity, as it’s a creative new approach with lots of related benefits and advantages. Although there are some potential downsides, it’s still considered s a perfect crowdfunding method.
