A New Opportunity
2009 witnessed the release of Bitcoin. Bitcoin, a form of digital currency, created a whole new market for digital investments and business markets reaching far beyond just the tech world. Now investors can use Bitcoin and other digital currencies to trade, sell, and investe in crowdfunding methods known as Initial Coin Offerings (ICOs). Often compared to IPO’s, ICO’s take on a whole never level of risk and legal issues that lack the regulation of current IPO standards.
An ICO is a fundraising tool that trades future cryptocoins in exchange for cryptocurrencies of immediate, liquid value. The investment is unregulated and allows investors to raise money in bitcoin or other cryptocurrencies, allowing them to be easily traded similar to shares, but without ownership rights. Hence where the level of risk in comparison to an IPO is extremely high. Investors have to buy bitcoins or other cryptocurrencies with good faith that the projects will be successful. There’s already a lot of money being invested in the world of ICO’s and many businesses are beginning to join in on the potential to increase their earnings in the world of cryptocurrencies.
The market most definitely continues to grow, but still no crash. Investors placed over $250 million dollars in ICOs by the spring of 2017.
Motivation to Act
Regulation is not part of the current ICO process. This lack of regulation should beget caution for potential investors. The vast majority of companies launching ICOs advertise them as “software presale tokens”. This allows them to move around and legal requirements that would be a part of a security sale. Most ICO’s don’t even state the word “sale” and instead refer to the opportunity to invest as “crowdsale” or “donations”. Without regulations the market of ICO’s moves much more quickly than IPO’s, thus good investments can see capital far sooner than traditional investment market opportunities.
Regardless of the risk, right now the cryptocurrency market is expanding at a fast rate. Many investors predicted that when bitcoins first began to appear in the market, that the system would bubble fast and then crash. The market most definitely continues to grow, but still no crash. Investors placed over $250 million dollars in ICOs by the spring of 2017. This makes it clear that the market holds potentials for investors to increase their worth exponentially if they’re willing to take on the many risks that follow an unregulated market.
Investors can take a number of steps to lessen their exposure to risk if they involve themselves in an ICO for its potential to earn. They must clearly research the ICO product. Investors must also investigate the actual existence of the corporate entity, and determine whether they have a staff and a product in production.