Good morning Platinum Crypto Network,
At Platinum Trading Institute (PTI), we are excited to offer this primer on ICO Investment, fundamentals. In particular, this discussion is made sufficiently simple such that it can be followed by anyone with little or no understanding of cryptocurrencies.
However, before we delve into it, I would invite Network members to sign up for a one-on-one exclusive session with Mr. Nirav Shah.
Initial Coin Offerings (ICOs) is akin to offering shares to crowdfund a Blockchain or cryptocurrency based project. For example, in the above table, Stratis was launched to help inventors to develop their own Blockchains. It has raised over $590K and stands at the value of $4.97. At the last count, according to Coin schedule, over $1.1 Billion has been raised thus far in the open Initial Coin Offering market.
IPOs versus ICOs.
Even though, compared with Initial Public Offerings (IPOS), ICOs differ from IPOs in many respects. IPOS are often delivered in terms of a number of shares, a paper document for a given issue. Its price is usually quoted in fiat currencies and its offering is handled by major brokerage houses. In general, these brokerage houses perform their own ‘Due Diligence,’ on a given IPO prior to issuing it. This backing of a reputable brokerage house lends also to the credibility of the IPO. A major shortcoming of the IPO is the fact that due to brokerage house intervention, often the IPOs are available only to Institutional and large investors. Thus, they are not truly ‘Crowd Funding’ mechanisms.
On the other hand, ICO Investment is TRUE crowdfunding mechanisms. For example, Ripple (XRP) pre-mined one Billion XRP tokens, and sold them to investors in exchange for Bitcoins or fiat currencies. Followed by XRP, Ethereum, Aragon, and Status.im were able to raise hundreds of Millions of dollars through pre-launching of the respective coins.
There are several other notable differences between IPOs and ICOs. In general, IPOs are issued for an existing technology, product, or an idea. For example, say an APPLE device was developed and sold using private investors’ funds before it was ever sold to the public. The pre-existence of technology is thus less risky and breeds confidence among investors. On the other hand, ICOs are issued prior to the technology or the product being developed. Thus, they are riskier and often investors have to rely on the promise of the underlying technology for making ICO investment decisions.
Is ICO Investment Legal?
The legality of ICO Investment is still an open question. They are new and still unregulated financial instruments. In addition, they do not follow any traditional pathways for generation, sale, and dissemination among the investors. However, SEC has recently issued a series of opinions that lead to its acceptance by the traditional investment communities. For example, some applications of these tokens are just only that – they are utility tokens – and used for a specific use. Some of the gaming tokens fall under that category. On the other hand, some of the reputed ICOs allow the purchaser to own them for some future gain in their values. In that case, these tokens are viewed as an investment or a security – for example, Ripple or Ethereum.
How are ICOs Priced and Issued?
Recall that ICOs are the mechanisms to crowdfund a given project, contract, or a product. Thus, an inventor or an entrepreneur sets up a protocol or a Blockchain for the product that he envisions to launch. Once the Blockchain is established, his next step is to mine coins in support of that product or the contract. At a given point in this mining process, the miner names the coin and establishes its initial offering price. This could be $0.10 or $1.00 – at the discretion of the miner. In addition, the miner can offer a low price to initial investors – increasing it gradually for later investors.
The next step is to facilitate its sale and dissemination. Just like typical brokerage houses, (e.g. Morgan Stanley, and Goldman Sachs), there are crypto exchanges that list most popular coins. Some of these exchanges, like Coinbase, Bittrex, or Kraken are more reputed and offer significant protection against coin hacking and fraud. A coin can be offered for weeks or a month, though there have been instances where initial offering has been exhausted in a matter of minutes raising hundreds of Millions of dollars. The ICO issuer also resorts to social media outlets, his own website, and other digital marketing approaches to make Initial Coin Offering more accessible to the public
How to Make ICO Investment Decisions?
Just like any other ICO Investment decision – a due diligence of a given ICO product is almost a must. Thus, researching an ICO is a critical element prior to investing in any offering. There are several ways to research a given ICO.
o Evaluate Top ICO list,
o Follow ICO watch lists as advertised by major exchanges,
o Acceptance by a major exchange, and finally
o We, the Platinum Trading Institute (PTI) experts invite you to subscribe to our Cryptonnaire weekly.
In addition, just like an IPO, the underlying security – in this case – the Blockchain technology is critical to evaluating the strength of an Initial Coin Offering. Fundamentals matter for ICOs also. Although, unlike an IPO, in this case, the strength and credentials of the ICO team matter immeasurably. The credibility and expertise of this team are important, as it will make a difference between the success and failure of the coin.
Once you have decided to participate in an Initial Coin Offering, you need to open an account with a crypto exchange that would let you purchase Bitcoin (BCT) or Ethereum (ETH) using a fiat currency. This is important, as most ICOs will exchange the coins only for these two major cryptocurrencies.
Once you have a decent, diversified portfolio of coins then you are ready to either trade actively, buy and sell sparingly, or store the coins for a long-term profit strategy. This is the step, where our experts at Platinum Trading Institute (PTI) can help you formulate a strategy through Crypto Mater’s and Cryptonnaire educational programs.
The information you’ll find in this article is for educational purpose only. We make no promise or guarantee of income or earnings. You have to do some work, use your best judgment and perform due diligence before using the information in this article. Your success is still up to you. Nothing in this article is intended to be professional, legal, financial and/or accounting advice. Always seek competent advice from professionals in these matters. If you break the city or other local laws, we will not be held liable for any damages you incur.