Initial Coin Offerings (ICOs) and early-stage investing

• Understand what an ICO is, as well as the history and hype around it.

• The Evolution of Initial Coin Offerings (ICOs)

• What exactly is an investment platform？

• Early-stage cryptocurrency investment returns and hazards

The concept of “earning” from cryptocurrencies was mostly limited to mining in the early days of Bitcoin. For committing blocks of validated transactions to the blockchain, miners – first persons, then pools – were rewarded with bitcoin.

In today's world, there are a variety of ways to make money, ranging from staking and trading to providing goods and services in exchange for cryptocurrencies. ICOs and investing platforms are another way to get involved with digital assets.

Initial Coin Offerings, or ICOs, are effectively crowdfunds for new crypto-related businesses. ICOs (Initial Public Offerings) are the stock market's stripped-down version of IPOs (Initial Public Offerings), in which a private corporation's shares are presented to the public in a new stock issuance.

In 2017, ICO fever swept the sector, with investors lining up to get their hands on newly issued coins, raising up to $5 billion. These daring investors were clearly betting that their investments, like Bitcoin, would skyrocket in value. Some succeeded, while others failed; eventually, the ICO bubble burst, and crypto entered a long bear market.

Although most early-stage companies receive money through private token sales and seed rounds these days, ICOs do pop up from time to time, letting common investors to “get in on the ground floor.” There are also certain investment platforms that promise a healthy return and allow users to bootstrap a promising new business.

While we can't show you how to make money with ICOs, we can tell you more about them. It's up to you to decide which crypto projects to invest in.

The history of Initial Coin Offerings (ICOs)

Although ICOs have become synonymous with 2017, the first token sale took place four years ago.

Mastercoin raised $500,000 in bitcoin in 2013 for a project that aimed to harness the Bitcoin blockchain while also providing new functionality.

Other ventures quickly followed suit, capitalizing on rising investor confidence by exchanging cash for utility tokens that, in many cases, had no meaningful use.

Ethereum arrived in town in 2014 and raised 3,700 BTC ($2.3 million) in under 12 hours. It was a complex project with lasting strength, unlike some of its predecessors, and it didn't take long for it to overtake Bitcoin as the second most popular cryptocurrency.

Ethereum also became the most popular blockchain platform for primary coin offerings (ICOs), with tokens based on the ERC20 standard.

ICOs essentially took out the barriers to early-stage investment, allowing anyone with ETH to support a project they were passionate about.

Many investors were convinced by Ethereum's success that they might profit from ICOs by investing in them. Few seemed to mind that these fundraisers were dangerous and uncontrolled, and despite the difficulty of differentiating the truly promising ventures from the boom-and-bust schemes, money poured into the market.

The DAO broke a new record by raising $150 million in ETH two years after Ethereum's record-breaking token sale. Filecoin raised $257 million a year later, in September 2017.

The ICO market had largely collapsed by 2018.

Many factors contributed to this, including increased regulatory scrutiny from the Securities and Exchange Commission (SEC), which deemed many ICO tokens to be securities; dwindling ROI caused in part by the onset of crypto winter; and a ban on ICO advertisements by platforms such as Facebook, Twitter, and Google.

Though the goals were positive - to democratize early-stage investment - the ICO mania in fact matched many of the flaws in traditional investing, notably the Cantillon Effect.

This shows how the financial system rewards people just for having privileged liquidity access - money follows money.

Early investors received cheaper tokens due to the way ICOs were constituted, which usually meant investment funds that were invited to participate. Early investors were rewarded with immediate profits, leaving latecomers holding the bag as access was gradually widened with reducing discounts, but enough frenzy to ensure uptake, rewarding early investors who could bail with immediate profit, leaving latecomers with the bag.

On a more basic level, there were various incidents of large ICO investors squeezing out smaller players by charging exorbitant transaction costs, thereby front-running the process.

Some ICOs have been found out to be scams, with the scammers erasing their websites and social media profiles and making off with their money.

STOs, IEOs, and ICO Evolution

Despite the negative press generated by exit scams, many ICOs have provided investors with amazing returns. It's important to note, though, that these aren't get-rich-quick schemes; the best initiatives are those that have the potential to pay off over time. It's about putting money into a sustainable firm that meets a demand and employs talented individuals.

The ICO landscape has changed, and there are now a variety of similar ways for investors to invest in crypto businesses. STOs, for example, let investors to purchase digital tokens that represent assets (stocks or bonds) in a cryptocurrency company, with ownership recorded on the blockchain ledger.

In other words, investors will be holding a regulated investment rather than an unregulated altcoin that may be worthless in all but name.

STOs are primarily geared towards accredited investors, while ICOs are aimed at the general public. To satisfy regulators, investors must at the very least pass thorough Know Your Customer (KYC) checks. They are less accessible than ICOs in this way.

The IEO, or Initial Exchange Offering, is another progression of the ICO. ICOs that list directly on a digital asset exchange, which is in charge of screening out problematic actors, are ostensibly these. High-profile interactions provide credibility to a project because the participants' reputations are on the line if the project fails.

In terms of ICOs, there are numerous platforms that keep track of current chances. One of them, Top ICO List, lists all upcoming STOs, ICOs, and airdrops, as well as project details. You might also use Coinmarketcap f, which provides comparable data.

Platforms for cryptocurrency investment

The overwhelming success of initial coin offerings (ICOs) demonstrated how ready persons were to invest in crypto-focused businesses. As a result, it was only natural for specialized investment platforms and asset managers to emerge. Some, like Grayscale, are aimed towards high-net-worth persons, while others are aimed at everyday people looking to put their money to good use.

Platforms for Investment

Rather than just owning a native coin, investment platforms allow investors to become shareholders in crypto companies and profit from the success of the underlying business. This may make them more enticing to investors who would rather see a pitch deck and concrete financial facts than a whitepaper and an Ethereum address.

They are growing at the same rate as typical Crowdfunding platforms like Kickstarter, however they aren't geared toward small investors. Investors must meet certain conditions, such as being sophisticated enough to understand how investing works and/or having enough net worth to do so safely.

One example is BnkToTheFuture.

To date, its users have invested over $880 million in crypto and fintech businesses such as Kraken, Bitstamp, and Bitfinex, all of which have produced considerable returns for early investors, albeit this does not guarantee that every investment will be a success.

Investor monies are stored in escrow, separate from the firm, and provisioned for investment in a pitch after it exceeds its minimum funding objective with BnkToTheFuture (and platforms like it). Investor confidence is ensured by a variety of payment options and bank-grade security processes (socket layers, 2FA).

There are considerable risks and drawbacks, like with any investment:

· Only a private sale or a public listing will yield a return on investment.

· If the company fails before that happens, you will lose your money.

· You do not have voting rights if you own SPV shares.

Individuals can become indirect shareholders in a company or fund by investing through a Special Purpose Vehicle (SPV) that retains their money. Though the SPV's shares are effectively locked until the firm is purchased or publicly launched, there is a secondary market for the shares that allows you to sell or buy-in if you missed the investment period.

Cryptocurrency Investing's Evolution

The broad long-term method to determining value known as fundamental analysis, which we explain in detail in our section on trading crypto, is essentially required for early stage investment platforms.

They are another step in the maturation of cryptocurrency investing, which began with the ICO craze. It's still tough to gain exposure to cryptocurrency outside of hodling or trading it. Many traditional investors would rather call their financial advisor or broker and ask them to pick a fund or index to provide indirect exposure rather than getting their hands dirty in this way.

There are currently few opportunities to do so. Grayscale was the first to market with GBTC, the Grayscale Bitcoin Trust, which allows authorized investors to gain exposure to bitcoin price movement without actually owning it.

The approval of a US Exchange Traded Fund (ETF), which would give a large number of regular investors simple access to a fund that merely follows Bitcoin or a crypto index, is expected to be a major turning point for crypto investing. To yet, the SEC has denied all ETF applications, but there are at least eight new submissions (at the time of writing), and Canada recently approved its first, putting pressure on their neighbor, so keep an eye on this.

If a Bitcoin ETF is approved, it will mark a watershed moment in the growth of cryptocurrency investment, bringing it into the reach of pension funds and conservative financial companies, a far cry from the first Ethereum ICO.