What Is An ICO And How Can We Trade It?! - Forex News by FX Leaders

What Is An ICO And How Can We Trade It?!

Posted Thursday, September 14, 2017 by
Shain Vernier • 2 min read

There is no denying that 2017 has been the year of the cryptocurrencies. Unstoppable momentum has generated incredible returns for the likes of Bitcoin, Ethereum, LiteCoin and many others. But how do these digital assets get their start?

The answer is through an Initial Coin Offering (ICO).

Crypto ICOSICOs Are Challenging Traditional Finance

What Is An ICO?

Most people with a basic understanding of finance are familiar with the concept of an Initial Public Offering (IPO). IPOs are the traditional way of raising money for a private company that “goes public.” They involve issuing and selling shares of corporate stock on the open market.

ICOs work in a similar fashion, except that they are for launching enterprises facing the cryptocurrency environment. Instead of issuing shares of stock and selling them on the open market, an ICO transfers ownership rights to investors via “tokens.” The entire process is built upon the “crowdfunding” model.

Each ICO is unique, so I will spare you the intricate details of how tokens relate to value in terms of the cryptocurrency market. But there are a few distinct advantages that ICOs offer startups and investors:

  • Not formally regulated

  • Compensation to investors is flexible

  • Fast way to raise giant sums of capital

  • Potential for extraordinary investor returns

2017’s Largest ICOs

ICOs have become a major factor in the cryptocurrency marketplace. To get some perspective on the values involved, take a look at 2017’s top four ICOs:

ICO                  Amount Raised

Tezos                 $222 million

Eos                     $183 million

Banco                $153 million

Status                $ 95 million

The speed in which these sums are amassed is mind blowing. For instance, Tezos raised over $200 million in under two weeks. The crowdfunding model for crypto-startups certainly looks to be the future of finance.

Overview: It is true that ICOs can bring huge profits, letting investors get in on an infant cryptocurrency for mere pennies. Initial investors in Ethereum got in for under $1. It currently trades near $300 just a few years later.

However, they are inherently risky. New ICOs are launched every day so the potential for loss or outright fraud is considerable. That is where specific expertise is needed to properly trade an ICO offering. Social trading platforms or comprehensive brokerage support can be useful tools in making ICOs work for you.

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About the author

Shain Vernier // US Analyst
Shain Vernier has spent over 7 years in the market as a professional futures, options and forex trader. He holds a B.Sc. in Business Finance from the University of Montana. Shain's career includes stretches with several proprietary trading firms in addition to actively managing his own accounts. Before joining FX Leaders, he worked as a market analyst and financial writer.
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