Why should someone invest in an ICO?

[PowerLaunch]

First off let me start by saying that I'm using ICO as a broad term encompassing all token sales.

With that out of the way let me get down to it.

I hear it all the time... (insert project name here)'s token is down 53% from the ICO price one week after it was listed on an exchange! Why would anyone invest in an ICO when we can just get the token cheap on an exchange?

It seems to be a good question when you read it, I mean, we see it all the time. MANY projects do decently well during their token sale, only to drop as soon as the tokens hit the open market. Why then should any of us invest during the token sale? Here are the reasons that come to mind for me.

1. It's good for the industry. The more people investing in ICO's the quicker the cryptocurrency industry, as a whole, advances. Think back to last years rally. EVERYONE was participating in token sales of some kind. New companies were moving into the cryptospace en masse. I do have to point out that there were also a LARGE number of scam sales popping up at the time, but the fact remains -- the industry was booming and the markets reflected that. Maybe this isn't a good enough reason, so let's dig deeper.

2. Volume. The limits to how many tokens you may buy during any token sale are MUCH MUCH greater than the volume available at those terrible exchange prices after listing. Think of it like this. Sally buys 1 Million 'blabla' tokens during the token sale for $0.10 each. As soon as those tokens hit an exchange the price plummets to $0.05 -- Bob buys all of the 1000 tokens available at the $.05 price. Over the next few months the price gradually increases, until finally the price surpasses the token sale price and hits $0.11 -- Sally's tokens are now worth $10k more then she paid. Bob's tokens are now worth $60 more than what he paid -- so while Bob's % of profit is better, in actual $ terms, Sally is MUCH better off. Sally didn't have any opportunity to buy 1 Million tokens at $.05 even though the 'price' of the tokens were at $0.05 (because there were only 1000 tokens sold at that price). So who made more money? Neither. Here's why...

3. You Lose or Profit if you SELL. There is NO reason to get worked up about a token's price immediately after a token sale -- UNLESS YOU SELL Immediately, but why would you? You truly believed in the project when you invested -- what changed? Nothing!!! That brings me to the next point.

4. NOTHING HAS CHANGED! The token sale just ended, and now the token is listed on an exchange before any of the dates on the roadmap. The project hasn't had time to mature and make developments and reach milestones on their roadmap. The product isn't finished and the project hasn't started profiting yet. Why would the price increase with absolutely no reason? If you're looking to make a quick dollar -- maybe you should focus on trading instead of INVESTING (and know the difference).


All this being said -- I offer the following advice:
"Don't invest in ICOs to make quick money. Do you research and only invest in ICOs if you 100% truly believe in a project, and the potential for profit -- EVERY good investment has a significant amount of risk involved. If you plan to invest in a token sale, let the team do their job and develop the project before you complain that you aren't driving a lambo after investing only $100 -- if investing was that easy EVERYONE would be a millionaire/billionaire --- if EVERYONE is a millionaire/billionaire, then no-one is.



That's a few reasons I could come up with off the top of my head -- anyone have any thoughts, arguments, or additions? Hopefully we can get a good list of pro's and con's going here -- so we can share this thread the next time we're asked "Why should someone invest in an ICO?"

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[LeGaulois]

I am not sure if you're right to say it's good for the industry. Seeing the number of scam ICO I don't think it is helping the industry at any point (other than giving a bad reputation). 0nly 44 % of the projects were still active 120 days following the end of their fundraising campaign It may be good for companies/projects trying to raise funds as an alternative to the traditional ways, however, entrepreneurs are now going back to the old school methods.
Also, a study by PwC found that out of a dataset of ~3500 ICOs, “only 30 % of those have closed successfully” or “lost momentum.”
See the decline


People usually sell theirs token immediatly after the token sales ended and as soon the token is listed on a exchange. It usually create a dump in the price. The one not selling their tokens so soon are the ones really believing in the project. However, most of the investors don't really care about the project directly, they're more interested in the profits that can be made

[vy99]

Seeing the number of scam ICO I don't think it is helping the industry at any point (other than giving a bad reputation).

Here's the problem with bringing up scam ICO's all the time...for the most part anyone with half a brain can tell when an ICO is a scam, but people still fall for them. It's really no different than scams in real estate. You always see people selling "land" that turns out to be swamps or other scams in real estate but no one thinks that the real estate industry has a bad reputation.

Yes, scam ICO's do exist but scams exist with any investment industry. It's up to the investor to be diligent and do their research before they put their money into something.

[PowerLaunch]

I am not sure if you're right to say it's good for the industry. Seeing the number of scam ICO I don't think it is helping the industry at any point (other than giving a bad reputation). 0nly 44 % of the projects were still active 120 days following the end of their fundraising campaign It may be good for companies/projects trying to raise funds as an alternative to the traditional ways, however, entrepreneurs are now going back to the old school methods.
Also, a study by PwC found that out of a dataset of ~3500 ICOs, “only 30 % of those have closed successfully” or “lost momentum.”
See the decline

I understand your point but I'd like to point out --- the fact that only 44% of projects were still active after 120 days could be directly related to the fact that many people dumped their coins. Which goes back to my point that ICOs should be for investors, not traders. The reason many entrepreneurs are going back to traditional methods is likely due to the decreasing numbers of people investing during token sales, as well as increased regulations. The regulations, IMO, are a good thing because it will cut down on the number of Scam projects, and hopefully offer an avenue of recourse for those that get duped into investing in scam projects.

People usually sale theirs token immediatly after the token sales ended and as soon the token is listed on a exchange. It usually create a dump in the price. The one not selling their tokens so soon are the ones really believing in the project. However, most of the investor don't really care about the project directly, they're more interested in the profits that can be made

Yeah I agree here, too. I also feel that profits will be more likely to be made if there are more believers in the project, and less that think token sales are a good way to "get rich quick". Like I said, if it was that easy then everyone would do it.

[PowerLaunch]

Seeing the number of scam ICO I don't think it is helping the industry at any point (other than giving a bad reputation).

Here's the problem with bringing up scam ICO's all the time...for the most part anyone with half a brain can tell when an ICO is a scam, but people still fall for them. It's really no different than scams in real estate. You always see people selling "land" that turns out to be swamps or other scams in real estate but no one thinks that the real estate industry has a bad reputation.

Yes, scam ICO's do exist but scams exist with any investment industry. It's up to the investor to be diligent and do their research before they put their money into something.

Exactly! It's the same in any industry, especially new industries. 99% of times regulations come about based on past events -- most regulations do no precede the actual problem. Problems arise before solutions are established. It's the unfortunate way our world works.