The difference between the starting and the final ICO price is significant. How are these changes in value formed and what are the reasons? Why does one cryptocurrency become successful while the other rapidly goes down just after the Initial Coin Offering? Investors are extremely worried about this issue, since the cases, when contributors do not receive the desired benefits, are not so uncommon.
Table of content:
- Sharing of the seed capital: what are the main expenses?
- The main factors that influence the final price
- Conclusion: the experts’ advice
What is the seed capital shared for?
The main ICO budget is assigned by the project management. The crucial factors here are the business prospects, the presence of a clear strategic development plan and, of course, personal requests. The project is doomed to failure if the organizers set too high a price, and at a reduced cost the amount of funding received may not be enough to realize even the most important tasks, which can also result in bankruptcy. All in all nobody wants to be involved in a scam.
ICO is often compared to IPO (Initial Public Offering) but in the field sphere of the cryptocurrency economy. The ICO tool is a token that is an analogue of shares, with the difference that by purchasing all the tokens you will not become the owner of the enterprise, so many experts tend to compare any ICO with the crowdfunding. ICO assets are not tied to real value. The investor makes a profit on condition of the project's success. Blockchain technology significantly reduces the cost of the entire process, but the goal is to attract the investments, that will be larger than the expenses.
Long before the ICO presentation, a whole team of specialists should carefully work on it. Typically, this pre-ICO period lasts from 3 to 6 months, and during this time programmers, lawyers, advisors, designers should think through each stage, every detail. Their services are offered by companies that have relevant experience and successfully implemented projects. If you are unable to independently find professionals, it is better to seek the qualified assistance. Bounty campaigns demonstrate the effectiveness.
So, where will your starting capital go?
Development of MVP
It's good when the idea is yours personally and you are completely sure of its success. However, often the organizers are only planning the development of MVP (minimally viable product). The real sector in ICO has demonstrated its inconsistency; therefore, it is not necessary to tie the release of tokens to attract investments for plant development, production, etc.
White Paper is a big and serious work. The idea should be stated in the most detailed, accessible and convincing manner in the document. Reading it, an investor makes sure, that the token will grow in value and the real profit will be received. White Paper consists of several parts and each of them must be thoroughly checked by the specialists of a particular profile, including lawyers.
The legal opinion is an integral part of any White Paper. Large investors primarily pay attention to the legal aspect of the project. The ICO status has not yet been determined in many countries and many experts consider it being in a gray zone, but you, as an ICO owner, deal with money first and foremost! In order to avoid any claims from the supervisory authorities, seek assistance from a serious law firm. Many US companies have great experience in this field.
Ethereum blockchain is a fertile ground for the most of existing and executed ICOs, but it is not a necessary condition. If you do not plan to release tokens via the ETH smart contract, just implement the cryptocurrency through your own blockchain. In this case, ICO price will grow many times, because you will have to involve some additional staff in the work. The blockchain experts can be attracted by means of the bounty programs.
The majority of potential investors will firstly study your offer on the site. Presentable, carefully thought out, with the investor's office, available from any device, with all the downloaded documents - the resource clearly demonstrates the seriousness of your purpose. The standard of the website for the ICO presentation is a one-page. Whitepaper for the convenience of users can be offered in several languages. The standard is English, therefore, in addition to the project, competent translators and editors are involved.
Cooperation with ICO trackers and listing on stock exchanges
There are several ways to edit the information about ICO, and cooperation with ICO trackers is one of the most effective. Here you will also be offered additional services in the form of mailing on the existing subscriber base, preparing reviews and articles. It's not free. Listing on major exchanges - after all you will display your token here - also costs money. ICO marketing also includes work in social networks, publications on the well-known resources, banners and other ways to attract attention. All it needs a lot of money.
Dynamics of the asset price after the ICO
After the ICO the most exciting and responsible moment comes. Did the investments prove a success? What will be left for investors and bounty campaign participants? There are a number of factors that affect the dynamics of prices:
- The number of participants in the auction plays its role. Demand for tokens raises the price accordingly.
- Some unexpected and often negative information about the content of the project or its founders can reduce the rate.
- The stability in the market of cryptocurrencies affects the quotes of tokens: if BTC and ETH decrease, internal assets become stagnant.
- Insufficient liquidity on the exchange can provoke a sharp decline in the cost of even a very promising project.
- The collapse of the price can be caused by one of the large investors, who purposely arrange a provocation to buy up assets.
The number of ICO in 2017 has doubled in comparison with the results of 2016. In 2018, the current trend will continue, therefore, it will not be easy to occupy the niche. To earn millions on the ICO, as such outstanding personalities as Vitaliy Buterin did, is quite difficult nowadays. Experts recommend choosing some promising project which ICO price has fallen as an object for investment. The Ethereum base itself is insurance if the idea fails. You can profit from the ETH growth and cover the costs.