Early token sales are a great way to make multiple times your initial investment in the cryptocurrency market. This does not mean that they are completely safe. Early token sales can come in the form of ICOs (initial coin offering) or IDOs (Initial DEX offering).
Both are unregulated means by which companies and corporations seek to raise money for certain projects. In these token sales, the issuing company creates a new cryptocurrency and offers a small amount to the public. Interested investors may buy these coins before their official launch. When the official launch comes, the initial holders can choose to sell them for a higher price or to hold them for longer. ICOs are similar to Initial Public Offerings (or IPOs), which are the non-crypto equivalents of ICOs involving stocks or shares in a company.
ICOs Can Be Risky
It is easy to think of ICOs as quick money-making schemes. One where an investor simply buys the right coins and waits for the perfect time to sell. In some ways, anyone who thinks like this would be right. In other cases, however, ICOs can be disasters waiting to happen.
It is important to know how to spot the right ICO, how much to invest, and when to sell your holdings. This is the primary aim of the remainder of this section.
How To Spot The Right Early Token Sale to Enter
There is no foolproof way to find the right ICOs, as these programs are subject to a lot of risks. Some ICOs have provided massive returns to investors. More often than not, however, some of these schemes turn out to be fraudulent.
Early Token Sales are unregulated. That goes without saying that they should be invested in with caution and plenty of research.
There are a few pointers that may help you spot the right early token sales. Some of them are highlighted below.
Understand What You Are Getting Into
It is important to first understand what you are getting into before investing. How long is the token sale going to last? Does the region you live in pose any purchasing restrictions? Are there locking or vesting periods? All of these are important aspects of a token sale to understand and have answers to before putting a single dollar in.
Complete KYC (Know Your Customer) And AML (Anti-Money-Laundering) Checks
The more reputable token sale issuers require KYC and AML checks. It is important to complete these checks, as they are an indication that said issuer is legitimate and that the token sale is not a scam.
Are Locking or Vesting Periods Involved?
Legitimate projects always offer roadmaps they follow to the letter, from initial sale to launch. If the issuer of the token sale requires a vesting or locking period, you should check to see if this period corresponds to their project roadmap.
If something about the locking period and the roadmap doesn’t add up, you should stay away.
What Security Protocols Have The Token Sale Issuers put In Place?
Hackers and other attackers often target issuers of token sales with exploits like DDoS (distributed denial of service) attacks. Attacks like these make it easier for these hackers to break in and make away with the money of investors. Before investing in an initial token sale, it is important to consider the security measures the issuers have put in place to prevent this from happening.
Investment in cryptocurrencies is subject to a lot of risks. It is important to first educate oneself about the potential risks of investing in a particular project.
Remember never to invest more than you can afford to lose.