Hi guys,
Been reading about cryptos for 3 months and invested some money 4 weeks ago.
I now have my eye on an ICO which is believe in.
Like most ICOs you can deposit BTC or Eth to get the new coins.
However this got me thinking:
Lets say 1BTC is 8k dollars and i invest 1BTC in ICO X tot get 8000 Xcoins (random name). Which means 1xcoin = 1 dollar.
This means Xcompany now has 1 BTc worth 8k dollars and i get 8000 Xcoins.
At some Point Xcoins Will be added to An exchange.
Now for our example the price of neither BTC or Xcoin Changed.
The Company Sells it's BTc for 8k dollars and i sell all of my Xcoin for 8k dollars.
Somehow the company has 8k and so do i. So we "created" 8k dollars.
Am i missing something here?
Are ICOs creating a fake market Cap?
Are they creating a bubble?
Who's actually paying that 8k dollars?
ICO's are not securities in most countries, shares sales have ownership of the company tied to them, in ICO you make no such contractual agreement with the ICO company. Mathematically I think you are getting the point.
Lets say 1ETH = 1 Token
They raise 80000ETH = 80000Token token + 20000(founders
)
Hence company's market value = 36,000,000 (it will depreciate(typically at a rate of 25-30% per annum) until their product starts making revenue)
The token do not hold any value unless someone is willing to pay for it. It has no ties to the company doing the ICO neither do they have an obligation to honor anything in relation to the tokens. VC's & Advisors who invest in ICO's are smart, they make money in a couple of ways (some receive all 3)
1. % Amount raised
2. Tokens
3. Share within the company
To make actual money you want to be part of the VC and Advisor group or join a pump and dump group.