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