Would you like to make a shed load of money? Probably. Most people do – which is why ICOs became so popular.
Funnily enough, the drive to make heaps of money from little effort is also why Initial Coin Offerings have more or less met their demise.
What’s an ICO?
An ICO is an Initial Coin Offering, which is a fundraising method unique to cryptocurrency. Similar to an IPO (Initial public offering) where shares of a company are sold to investors, an ICO is an event where a cryptocurrency is sold to investors.
Crypto companies create their own cryptocurrency and pitch it to the world. They have to tell you why it matters, what it can do and how it is going to be used. Investors soak up this information and deduce whether it could be a worthwhile investment.
Why would you invest in an ICO?
The answer is profit. The real question is ‘where does the profit come from’?
Time after time, ICOs were essentially money printing machines for all parties involved. The hosts, also known as token issuers, would raise millions and millions of dollars for what was essentially a promise. Investors would usually receive a generous return on their investment when the token began trading on the market.
The 2017 Boom
The success of ICOs could be largely attributed to the famous cryptocurrency bull market of 2017. Prices were flying, spirits were up and investors were unimaginably confident in their abilities.
It almost seemed like you couldn’t take a wrong turn. Almost every cryptocurrency was appreciating in price and most ICOs were making people money.
Since success was so frequent, demand was high. It was tough to get involved in the most hyped ICOs. It was like trying to buy popular concert tickets or a limited clothing release – you were racing against tonnes of other people and bots as well.
Investors were jumping into every opportunity they could. Even if one failed, the returns on the others were more than enough to cover the loss.
The Demise of ICOs
The money printing machine ran out of paper. In hindsight many investors realize that the mania was entirely unsustainable.
As the crypto market peaked and transitioned into a bear cycle, things starting looking worse. ICOs began to raise less money and perform worse. Before long, it was tough to get in on a that was profitable Initial Coin Offering.
The failure of recent ICOs led to investors becoming sceptical, which naturally caused a decline in the performance and quantity of ICOs.
They have been rebranded as Initial Exchange Offerings. They are an improved way for investors to fund a project they believe in. They are less frequent and more controlled, but can still return profits.