Pros and cons of investing in initial coin offerings (ICOs)
There’s no doubt that investor interest in cryptocurrency is at an all-time high. So, how can a novice get started? To participate in an Initial Coin Offering (also known as ICO), the investor needs to be comfortable with risk and willing to lose their capital on the chance that the rewards will be worth it. But, are they a wise investment?
What is an ICO?
ICOs are put out by startup companies to attract investors. The company sells tokens to encourage people to get on board while it has low value.
The investor exchanges currently valuable cryptocurrency for those digital tokens from the startup company. The tokens are placeholders for new cryptocurrency coins that the startup company hopes to pay out when the ICO is over.
What are the advantages of investing in ICOs?
ICOs are an effective way for startup companies to generate revenue. When investors decided to buy some ICO tokens, they get in on the ground floor of a promising new company.
If the company is a success, the tokens can be exchanged for cryptocurrency or perks like shares in the business, equity, credit, or even goods and services. Many people have become wealthy when the ICOs they invested in exceeded expectations.
Consider the disadvantages of ICO investing
As with any risky investment, there are a lot of possible pitfalls when it comes to ICOs. The biggest risk is that the startup company fails, causing the investor to lose money and only have worthless tokens to show for it.
Other problems arise because there is little to no regulation in the world of cryptocurrency, which may affect the company’s chances of success. Unregulated ICOs are often run by scammers looking for gullible investors.
Ultimately, it’s up to the investor to determine if participating in ICOs reflects their best investment strategy or not.