Ico, ico scam, invest in ico, fault of ICO
Cryptocurrency market is developing rapidly due to the succeed of Bitcoin, Ethereum, Litecoin, … Especially, with the help of ICO, many people take this a new way of speculation to make profit from the growth of coin from several dozen to hundred times.
Besides the potential ICOs, however, there are many fail projects which are also called “scam”. This article will help you to understand further and have a clear sight about ICO.
1. What is ICO?
If you ever study about stock, you should know the term “IPO”, standing for “Initial Public Offering” – which means issuing shares to the public for the first time. There are two ways that a firm can choose, released bond or stock. Therefore, IPO is a form of capital mobilization of enterprises.
Similar to IPO, ICO is an abbreviation for “Initial Coin Offering” that calls for capital in the new Cryptocurrency projects. To be more specific, in ICO, coin developers will create events and sell part of the tokens to investors for the purpose of raising capital and developing coin in the future.
Currently, most of the ICOs accept payment by Bitcoin, Ethereum or coins with high ranking in Coinmarketcap.
2. What is Crowdsale and Token?
In the ICO project, token is often released like stocks and uses the name of that coin to sell for the investors. Crowdsale is the token-selling event in the ICO project.
During the project, the founders also split Crowdsale and each crowdsale would correspond to a certain number of tokens sold to reach the funding goal.
For example, Kyber Network project (KNC) – an ICO project of Loi Luu (a Vietnamese) – has earned total 200.000 Ethereum, equal to 52 million USD.
A Cryptocurrency firm which makes money through ICO often creates a reporting plan defining the purpose of the project, its completeness and the potential for joint venture. In ICO operations, enthusiasts or supporters of the company’s initiative will buy some Cryptocoins distributed with fiat or virtual currency, these coins are called “token” and they are similar to stocks from IPO.
In cases where the collected funds do not meet the terms of the company, that ICO will be considered unsuccessful and money will be returned to the sponsors. Vice versa, if the funds succeed in the given time, the plan is considered to be able to start and complete.
In 2014, ETH project was released in the market and its ICO raised about 18 million USD, this project was put into use in 2015 and by 2016, value added was up to 14 million USD with an over 1 billion USD of market capitalization. This was considered as a successful ICO project that brought big profit for early birds, before ETH was released.
Consequently, ICO is much alike IPO and Crowdfunding is similar to shares of a startup company or company sold to raise funds for the organization’s activities in a ICO project. However, IPO has to deal with the law and ICO involves in those who want to invest in a new project like a Crowdfunding event while funds mobilized in the campaign are basically held in the form of donations.
Although ICO transactions are usually the breakthrough tools in the digital era and bring back lots of success, many investors are still careful with the ICO because of the fact that a number of people has take advantage of the advertising campaign to make frauds. Main cause is these fund-raising organizations are not monitored by the financial institutions such as the Securities and Exchange Commission (SEC), so that the money lost after investing will not be resolved and reinstated. This is the main reason why many people think that ICO is a fraud or scam!
3. Chances when investing in ICO:
This is one of the most concerned topics recently. Though investing in ICO is risky, the profit it brings is huge. If in an IPO, when a company wants to issue shares or bonds to raise capital, compliance with the law is what the company should do.
Therefore, investors need to take a close look at the firms that they are about to invest in, they can make an appointment with the company’s leaders or deal with the investing terms to be protected by law.
Meanwhile, in many countries, there is not any rules about ICO like China, ICO is strictly prohibited, so many investors do not recollect capital after investing because they choose the wrong company to invest.
While the growing trend of digital market has created thousands of ICOs, the emergence of companies as “mushrooms after the rain”, but only a number of projects are potential, reputable and worth your investment. There are a lot of ICOs with Scam projects and very high levels of risk.
How risky it is, there are many people still decide to invest in ICO projects. If you know how to choose good ICO projects, there is the potential, you will have the opportunity x5, x10, x20, x100 .. the initial investment amount and become rich quickly. This is also the reason that ICO is considered a “super-profitable” form of investment. For example, many people become millionaires overnight after investing Bitcoin, Ethereum, Ripple or some other potential coins.
Not to mention investing in MLM projects under lending coin model, the value can increase x20 to x50 times right after the investment ICO such as Bitconnect, Hextracoin, Regalcoin, Ucoincash, …
4. Risks when investing in ICO:
Everyone knows that investing in ICOs is often risky, but once successful it is a very big profit, even huge for investors. As noted above, since the ICO is not strictly regulated by the government, any organizations, individuals, or companies can make a call for capital through the ICO, which inadvertently creates as many as intentionally abuse the ICO to profit themselves.
They – “ghost companies” – have deliberately exploited the ICO and scammed by creating worthless coin, deceiving investors and “enticing” them to contribute capital. At the end, these organizations will “clean” the money of investors then disappear without a trace so that investors can not get legal intervention. This is also what investors are most worried about when joining the ICO.
5. Is ICO worth invested in?
It can be said, the cryptocurrency market is a trend of investment development strongly spread across the world, of which only recently developed in Vietnam not for long. However, ICO is a form of investment that deserves much attention and is chosen by many investors because of its super-profit resource. Just knowing how to avoid ghost companies, this investment is very easy to bring profit quickly.
In addition, before you decide to invest, you should study and make your own assessment to select the potential investment projects, which can easily succeed. However, it is advised by professionals that you should not invest all your money in only one project but split into other potential projects. But, let’s say again, if the decision to accept risk is higher then the success will be bigger, that is natural!
In short, ICO is a form of super-profitable and risky investment, which can cause you to lose money if you invest in ghost companies or scam projects, so find out before you invest and only invest with capital in your ability is what you should do.