ICO pre-sale, also known as Pre-ICO, is the token sale event that Blockchain companies trigger before the official ICO or crowd sale is triggered. In particular, ICO’s pre-sale fundraising targets are significantly lower compared to what is set for major initial coin offering (ICO).
Pre-sale is a method used by some cryptocurrency projects to raise funds before an official ICO takes place. Pre-sale tokens are sold to interested parties at a specific price. This move could prove beneficial for developers and investors, in case everything goes well and the digital currency becomes a success.
While project developers would obtain the necessary funding to complete their projects, investors can acquire an altcoin that could be worth a fortune in the future. Project developers also opt for an ICO pre-sale to trade their coin before the official ICO, with the goal of a price increase when their token is finally made public.
Some of these Pre-ICOs are used to accumulate money to cover the expenses incurred. On the flip side, others feature paid promotional ads, calculated recruiting, and meeting costs to help drive investor interests.
The tokens involved in the pre-sale process are cheaper than those available in the crowdsale. Pre-ICOs use separate smart contracts from the main initial coin offering for prudential reasons. This strategy is used to avoid a combination of Pre-ICO funds with funds acquired from the main ICO to ensure easy auditing and reconciliation of accounts.
The risks involved in an ICO pre-sale
But presale also carries some risks. Should the project fail, these early investors could find themselves with worthless tokens. Therefore, they will not get a return on their investment. Also, when the actual ICO occurs, increasing the supply of coins available to the public can decrease the value of the coins that investors purchased in the pre-sale.
On the other hand, developers should be on the lookout for investors who may sell the pre-sold tokens shortly after the main ICO with the aim of making big returns on their investment. These investors tend to sell at ICO prices when they get the discounted tokens.
It is never a good sign when a coin that underwent an ICO recently if some of the early investors start to unravel at the first opportunity.
Some of the supporters of the crypto movement also believe that the pre-ICO is the antithesis of the concept of decentralization. Decentralization is the underlying premise that is believed to be driving the massive rise and growth of the cryptocurrency sector.
In addition, there are regulatory problems. Most ICOs work with Ethereum blockchain using ERC20 fungible tokens. The US SEC may label Ethereum as a security asset soon, which would affect the sustainability of the growth of such tokens.
How to participate in a token presale
For anyone who wants to participate in a token presale or ICO, certain steps must be followed. Token sales work as a crowdfunding tool that is used to generate capital for startups to unleash new projects.
In these token sales, investors buy new cryptocurrencies directly from the developers using other cryptocurrencies such as Ethereum and Bitcoin. Token sales are also known as ICOs.
A great example is the BitImage (BIM) token. BIM works with the ERC-20 standard and the Ethereum blockchain. The token works efficiently in the crypto ecosystem and can be used in many other decentralized programs without any problem. The ERC-20 standard enables the pre-sale token to meet all common security needs in the industry.
The BIM token set the minimum purchase value at 0.1 ETH and the maximum purchase threshold was 500 ETH. The pre-sale lasted from April 26, 2018 to May 24, 2018, with a soft cap of 2,000 ETH.
The pre-sale strategy
It is quite challenging to participate in any ICO pre-sale for people living in the US. DAO creator lists supported countries that allow investors to determine if they qualify for a token sale that they might be interested in.
Also, StarTerra, a Decentralized initial offering (IDO) powered by the Terra (LUNA) blockchain, it also lists the jurisdictions in which it is allowed to operate. But, Solanium and PolkaStarter have no restrictions. These platforms have been responsible for the increase in NFT Market which has propelled the crypto space to new heights in 2021.
Although there is no consistency, anyone who wants to participate in the presale can use tools like Pylon to bypass the system. Therefore, the real problems are not related to access, but rather to the challenges of the investment strategy. One risk is betting on a coin that has yet to be tossed. These projects face delays in most cases, while some are not fully launched, resulting in losses for early investors.
Therefore, any investor who wants to participate in an ICO pre-sale should ensure that the development team is publicly known to avoid cases of scams and carpet pulling. In addition, the team must have the ability to complete the task at hand. In this case, long work histories with completed projects build some credibility for the team.
Also, the endorsement of top-tier developers like Do Kwon on the Terra blockchain bodes well for a token presale. The IDO should also work well to increase the likelihood of a large coin surge in the first week of release.
In the case of LOOP, the team created a comprehensive website around the coin. Anyone who participates in the Loop Markets gets LOOPR coins that they can sell and bet on the LOOP coins. The team created a comprehensive social media site, a blockchain version of Medium, as part of their project, which attracted a lot of interest from investors.
How to check the viability of a token presale
In the end, before investing money in an ICO pre-sale, you need to determine whether the coin mechanics make sense. Will the team launch a lot of coins in the official ICO so that what you buy in the presale is diluted almost worthless? Also, consider the lock-in and consolidation period.
Investors should review the documentation for the coin toss timeline which is typically a 4-10 year period. If developers rush to dump their coins shortly after the ICO, the price will plummet as they withdraw in value.
Second, investors need to find out if they will be stuck in a waiting period like the project developers. In addition, genuine coins have a vesting period that allows investors to make higher profits in case they are not sold immediately after the launch of the ICO. Typically, if you find a consolidation period, up to 80% of the value arises from withholding.
Tools like Pylon are useful as they allow investors to deposit their money without worrying that the project will fail. Pylon ensures that the investor will not lose anything as he recovers his entire initial deposit, although the consolidation period is long.
Through Pylon, developers get money from the return of investor money on the Terra blockchain using Anchor I. So if a project gets $ 10 million in deposits and presents 12 months of lock and grant, they get $ 1 , 5 million to launch your project from the anchor gives way. Therefore, the idea behind Pylon eliminates most of the risks associated with IDOs.
Important steps to participate in an ICO token presale
In the pre-sale, a percentage of the available tokens is delivered to the first investors. If some of the tokens are not sold at the end of the ICO pre-sale, they are carried over to the collective sale.
An ERC-20 compliant Ethereum wallet is required and must be compliant with the ERC-20 standard. Once the wallet is set up, the investor must transfer their ETH to a wallet of their choice, which includes Fog, Jaxx, and MyEtherWallet. On the day of the sale transaction, investors must prepare their Ether in advance for the transfer.
Investors can look forward to the opening of the ICO pre-sale and follow developer updates to determine if there are any last minute changes. The exchange rate may vary according to market fluctuations.
Once the pre-sale opens, investors can transfer the amount of ETH they want to contribute to the project using the address provided. Mostly, the pre-sale address of the token is displayed on the official verified sources.
Therefore, investors should avoid sending funds to addresses provided by unofficial sources. Only use ERC-20 compliant wallets mentioned in the project to make a successful transaction to invest in ICO pre-sale.
Lastly, investors should check the project news feed frequently to track the progress of the sale, especially if they want to buy more tokens later. After the pre-sale closes, the sell-off takes place on a scheduled date.
Tips for participating in the token presale
Investors should carefully monitor the exchange rate as it could change before the start of the sale as a result of significant market fluctuations. Therefore, check these fees before purchasing the tokens.
Careful with phishers and scammers. Investors should check the URLs, type the addresses or bookmark them to ensure that they are using the actual address indicated on the official project site. No genuine project asks investors to transfer ETH directly.
Never invest blindly. Always read the project whitepaper carefully to make sure your money is going towards a project that has enough potential to increase the value of the token in the long term. It is important to know that you are contributing to real projects that are not scams.
Review the team behind the token presale to determine their prior experience. This verification allows investors to determine if the team is reliable and competent to invest in their idea optimally. If the project proves to be genuine, it is advisable to participate in the ICO presale to get a nice bonus once the official ICO crowdsale is launched.