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Pre-ICOs (or pre-sale) and Their Relevance In The Cryptocurrency Arena

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13.06.2018
Pre-ICOs (or pre-sale) and Their Relevance In The Cryptocurrency Arena

Since the inception of blockchain projects and other ease of payment options on the decentralized platforms, we have continually seen an increase in the number of executable activities on the digital currency networks, and they seem to always come with something new for each time. Every dedicated cryptocurrency user or enthusiast is expected to keep up with the activity trends and events, as well as getting conversant with all the information.

One of the fairly new events that have become a common activity on the cryptocurrency arena, is the announcement of Pre-ICOs, otherwise, known as the token pre-sales. A lot of people have repeatedly mistaken a project pre-sale, for the token crowd sale (ICO). Now, although both events are used to mean the sales of the project tokens to investors from the public for the purpose of raising funds, ICOs are the ultimate intention of the project developers, while the pre-sales are only issued to usher in the big event. There are a number of reasons why blockchain project developers and management teams have decided to adopt this approach. Many of the altcoins and tokens that were birthed quite recently, had incorporated pre-sales events to their calendar schedules; and these activities have contributed to some of the successes their individual projects have recorded.

How does pre ICOs or pre-sales, differ from the ICO?

In order to get a detailed understanding of the concept of what pre ICOs really are, there is the need to start from understanding the differences between them, and the main crowdsale (the ICOs)

  • Pre-ICO sales are usually open to selected individuals, and not every investor who shows interest can necessarily participate. This means, those that are eligible to participate must have been selected by certain criteria. Usually, ICO developers mostly select investors that are able to push in heavy funds into the project, to participate in the pre-sales. Investors who have shown interests in the pre ICO may be required to preregister as a way of providing certain information about their financial strength, and willingness to be part of the project. This is basically what happens at the KYC whitelist preregistration. ICOs on the other hand, are open to much more people with lesser participatory entry rules.

  • The tokens that are sold in a presale are sold at lower prices, and with higher bonus considerations. Hence, the selected participating investors in a project, can already purchase the token at a considerably high discount rate that are accompanied still with bonuses, before other investors buy at relatively higher prices when the ICO starts. Investors at this stage, are able to gain a reasonable advantage over those that are restricted to the main crowdfunding ICO.

  • Shorter period for sales, as well as lesser amounts of funds are raised. Unlike the ICO sales that may spread out for months, with a relatively huge amount of money to be raised, pre ICOs usually are opened for a few days and may not extend a month (in the instance that it lasts this long). Again, the fund targets are usually not anything close to the hard cap of the ICO, and while ICOs are used to raised large sums, pre ICOs are concerned with raising just some relatively little amounts.

Since token pre-sales events have assumed their peculiar traits, they could also have their own advantages and demerit, hence cryptocurrency users and investors should know how well to leverage on this cryptocurrency fundraising tool. The reasons why project developers have to make pre ICO sales may be similar to the reasons why the main ICO itself has to run, but there are striking uses of each of the individual events.

Why pre-sales, when there is an ICO?

Before embarking on any project what so ever, the ideal thing many people do, is to have the methods to follow that would ensure the success of the intending project, or that would at least be an indicator signifying how much success is feasible. In cryptocurrency, pre-sale events have become important- both for the sake of the project management team, as well as the investors who would be putting their monies to it. The importance of conducting a pre-ICO is becoming enormous, especially for the following reasons:

Pre-ICOs may be useful in testing whether a user base would invest in a project or not.

Instead of starting an ICO offer that would not reach its soft or hard cap, and in which too much energy and resources would already be expended, the best way to determine what to expect, maybe via the pre-sales. The pre ICO stage enables ICO project developers know the possible statistics by rate, and are able to plan well if they think they still got prospect. If a project is not getting enough support from the pre-sales stage, then it may be a bad indicator for the coin offering. This event affords the developers some ideas to re-strategize, or even save themselves the waste of time on an ICO. If the pre-sale records unprecedented success, then it may also be a morale booster for the project team.

Use to gather immediate funds, and to make some hype

Pre ICO sales are also a new method of gathering funds required to run a coming ICO. By this, the ICO team is able to save extra cost serviced from their pockets or the externally raised capitals; and are able to cash in, on the project as soon as possible. Another benefit that goes with this, is that as they raise the funds, they are also able to raise some dust about the coming ICO, such that people are made to anticipate the big thing that is coming to town. So in essence, this is also a time when publicity and marketing is taken onto the heights of it.

Pre ICOs are also a good time for prospective investors to speculate and make their analysis on the feasibility of the project that is asking for their monies via the ICO. It helps intending investors decide whether the project is a good one to invest in, or not. Once the pre-sales are not impressive, most investors may not even consider the project when the ICO starts.

Demerits of Pre-ICOs

As useful as the pre-sales events are, they are also characterized by some disadvantages, and every party involved in the project- project developers, pre-sales participants, and the ICO participants may share a part in it.

Some of these disadvantages are the fact that project developers may have wrongly concluded that a successful pre-sale event would be an assurance of hitting the hard cap at the ICO; which is not necessarily true.

On the part of the pre-sales investors, they may end up discovering that they had invested in a wrong project since the very details of the plan are usually issued out during the ICO.

Sometimes the disadvantage in it for the ICO investor is that they get to buy at exorbitant prices from those who had participated in the pre-sales. But then, on the average, they still have the lowest risks to bear, as far as this is concerned.

Pre ICOs and Pre-sales are good ways to make some more profit from coming projects, but it is essential to weigh the options adequately, and put all the indices to the test, before saying ‘here’s my money.

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