We all desire to have investments in cryptocurrencies that have potential increase in price. Closely pegged to this desire is the frequently mentioned token economics. This relates to the amount the project is looking to raise i.e. the hard cap and the soft cap, the currency token price, total number of tokens offered by the project i.e. total supply and the token distribution.
A good investor will be at ease if the project discloses the actual amount it wishes to raise(hard cap) and the minimum amount of capital it wishes to raise(soft cap). A project reaching its hard cap is a great confidence booster into its value and growth in price. An inverse of this situation means the project will be in danger not reaching its goals and thus a low uptake by the public. Undisclosed amounts of capital to raise, leaves the investor to put in the highest amount of money for most tokens but will not assure of what amount of stake he/she has. A good investor will look at a definite hard cap and a reasonable & achievable hard cap based a project’s purpose and roadmap.
The total supply and the currency token price are related. I have noted that a project that issues a very large number of tokens (e.g. a billion tokens) for public sale will relatively have a low price. Good to attract the most investors but a disadvantage once the token is listed as the price movements tend to be small. A good investor will look out for good examples such as Bitcoin; a total supply of 21 million coins and keenly note that the tokens not taken up during the public sale have been burned to assure of non-dilution of the prices once listed. For success, a low finite supply of tokens/coins will result in high demand and thus lead to a rise in price.
The project has to clearly outline how the funds will be utilized and how they have been distributed among the public, angel investors, advisors, founders, employees and the company. A good project will link its token distribution to the roadmap. Because each phase or milestone of the project requires a certain amount of funding. A good investor will seek to select a project with a public distribution of 40% to 50%. This puts trust in the investor that the project team will strive to create value as they have a substantial stake.
All investors look out for bonuses in ICOs. By taking part in a pre-sale or early into a crowd sale one is assured in getting additional coins/tokens. A good investor, away from the crowd, will invest in coins that have a low bonus e.g. 30%. A very high bonus e.g. 150% should be a red flag indicating a likely post ICO price dump as the participants only want to get fiat for the coins/tokens. A very low bonus e.g. 10% is also a red flag as this will leave few to manipulate prices on exchanges once the coin/token is listed.
A pray that this be used for refinement in decision making and also be improved by the community. Let’s meet in the comment section and discuss more.
