In my last article, I briefly discussed the importance of recognizing the value of understanding the “language of cryptocurrency” before becoming heavily invested in this market. One of the ways I recommended learning the language was by doing what I did: listening to those who speak it as they communicate on social media like Twitter or Telegram. While not all the information shared is valuable, it’s a good way to pick up on what “buzzwords” are being used and start learning the general language of tokens.
This week, I’m going to describe how I narrowly avoided ICO investment disaster by being caught up in the crypto chatter I heard as a noob, and why it’s important to start becoming familiar with “crypto-speak,” especially as it relates to ICO’s, before it’s too late.
ICO FOMO
When I first began my crypto investing journey, I knew that Bitcoin was the “big coin,” similar to a blue chip stock on Wall Street. But a lot of what I was reading on social media was about a new cryptocurrency, a so-called “altcoin” issued by Tezos.
Tezos was the second biggest ICO ever, raising $232 million in 2017. Without getting too technical, Tezos was exciting because it was a more advanced blockchain technology that facilitated decentralization and efficiency better than the two most popular blockchains, Bitcoin and Ethereum. It had its own platform and its own coin — the future was full of limitless possibilities and I had to get in on it.
I was sure Tezos would be where I could make thousands and planned on investing my money and even my parents’ hard-earned money to help build their retirement nest egg. I enthusiastically subscribed to the Tezos emails and chatted with my new online crypto friends about this exciting new company. The hype surrounding Tezos and the money they were raising was mind-boggling. Most of us felt like we were guaranteed to lose by NOT investing rather than the other way around.
But what would I really be buying if I got involved in an ICO? I needed to understand how ICO’s worked before buying in, especially if I was going to invest my parents’ money. Was FOMO, “fear of missing out” driving my decision? Is that what was driving this ICO craze I was a part of?
WHAT IS AN ICO?: PRIVATE, PRE-SALE AND ICO STAGES
An initial coin offering, or ICO, is a way for companies to raise money by creating their own cryptocurrency, commonly referred to as tokens, and selling it to investors who believe the value of the tokens will be worth more in the future. Investors can buy tokens at a private sale, a pre-sale or at the main fundraising event, the ICO itself.
Private Sale ICO
A private sale ICO is commonly the first round of fundraising for a company who is interested in attracting a certain kind of investor who meets specific qualifications. For instance, some companies invite investors willing to buy over $25,000 worth of tokens, allow interested parties to register for private sale consideration on their website. “Cherry picking” investors can be useful for securing capital and ensuring a pool of stakeholders who align with corporate values and goals,
Pre Sale ICO
An ICO pre-sale occurs ahead of the actual ICO and is a set period of time in which investors can buy discounted tokens. The presale helps the company cover early startup and operational costs, and it helps them gauge the level of interest in their company or project, where to make adjustments, etc.
I was hoping to purchase Tezzies, the tokens offered by Tezos, at the presale, so I could get in cheap and then hold long term because I believed in the value of their company. Attracting presale investors who believe in the company and want it to gain value is what legitimate companies want because they help create stability when the ICO launches. They are less likely to sell or “dump” their discounted tokens right when coins selling for “full value” at the actual ICO become available. “Dumping” these coins makes them quick cash immediately but if too many are sold early, this drives down the value of the tokens, causing harmful implications for other investors and the company itself.
ICO
At the ICO, the tokens are available to purchase by investors at a value determined by the company who created the tokens. Yup, you read that correctly. Companies offering cryptocurrency initially set the value of their own tokens. Traditional ICO companies, many of which have not survived, offer a high volume of tokens (billions) for low cost (cents). With enough smart marketing for a catchy new product/platform, they can create lots of buzz and generate interest across all categories of investors. Investors who are looking to get rich quick or have little interest or understanding of the value offered by the company can swoop in, purchase lots of tokens, and then sell quickly. Like presale investors who dump immediately at the ICO, these later investors can wreak havoc in the same way.
NARROWLY ESCAPING ICO DISASTER: TRADEBITS VS. OTHER ICO’S
I avoided my own ICO investment disaster with Tezos largely by accident. I missed the pre-sale and never bought in, saving myself from untold headaches and loss. Read about the tale of the Tezos ICO.
I learned a lot about ICO’s from my near miss with Tezos, and several months later, I found Tradebits, a company that provides the trust, transparency and innovative technology I could bank on. Our model is based on our corporate values and we do everything possible to promote stability, growth and trust in our platform. Being a values-driven company distinguishes us from revenue-driven competitors in many ways and I will be discussing them more, and in more detail, in upcoming articles. But here are two important ways our ICO will stand out:
Accredited investors vs. Non-accredited investors
Accredited investors in the U.S., are investors who either have an annual income of $200,000 or have a net worth exceeding $1,000,000 excluding the value of their residence. (See SEC, Regulation D, Rule 501 for detailed definition.) Accredited investors are more likely to have greater financial literacy, experience, and ability to survive loss of investment funds, than non-accredited investors.
Tradebits: We only allow accredited US investors to purchase tokens because we are a company that prioritizes integrity, trust and transparency. We do not want to invite investors without responsible competent understanding of markets and finance. This will help us ensure that we select investors who can contribute and expand the business not only with money, but also with knowledge, experience and existing networks.
Others: Allow non-accredited US investors to buy tokens.
Valuation and Supply
Others: As discussed above, many other cryptocurrencies are offered by companies who wish to generate lots of buzz and revenue by offering their a high volume of tokens (billions) for little value, (a few cents). This invites lots of investors who want to make a quick profit looking to buy in cheap and sell at whim.
Tradebits: We are releasing a low volume of tokens but they are valued at much higher rates than others on the market. Rather than creating an inherently volatile system, we are promoting a responsible token and exchange for investors who are more serious, less reckless and hopefully more interested in joining with us to build a community and grow.
Please look for my post for more information on how online contacts can help guide your understanding of crypto investing @MillennialMike7
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About Tradebits
Headquartered in The Hague, The Netherlands, Tradebits is building the digital currency trading platform for the next 100 million users. It is the most high-performance, flexible and reliable digital currency exchange platform, capable of scaling and handling an unparalleled number of users and transactions per second and adaptable to the skill level of any trader.
Tradebits uses the same principles that power and secure the world’s most demanding stock exchanges. One of Tradebits’ hallmark features its configurability to match the sophistication level of every cryptocurrency trader. Users of the exchange will have access to 24x7 live customer service as well as a myriad of 3rd party trading apps and resources through the Tradebits Marketplace. Tradebits gives back to its community by using 40% of all trading fees for the continuous purchase of XBITS tokens across various exchanges to generate upward price pressure.
Join the discussion on our Telegram channel: https://t.me/tradebits_exchange
Read our whitepaper: https://tradebits.co/whitepaper
Project Status: Exclusive investor presale on now!
More info: tradebits.co
Author: This article was written by Mike Rogers, VP of Crypto Education & Research at Tradebits #Millennial