Saturday, 10 March 2018

Are Initial Coin Offerings a Sound Investment?

Since China and South Korea banned initial coin offerings (ICO), there has been a lot of speculation as to the soundness of investing in ICOs and a lot of questions asked as to exactly why China and South Korea have prohibited ICOs. Here is the truth about ICO investments and some tips on to ensure that when you invest money in an initial coin offering you are making a sound investment.

An ICO is a vehicle that new cryptocurrency ventures use to raise the initial funding that they need to launch their coins or tokens onto the market. It is very much like the traditional initial public offering (IPO) that a newly formed quoted company would issue to raise its initial capital.

When a cryptocurrency launches an ICO, it will provide potential investors with details of the new currency, how it will be managed, and who is behind the venture. It will also state in the information that it provides the total amount of capital it is attempting to raise, and it will put in place a time limit within that capital must be raised. If the full amount of the capital requirement is not raised, it will usually result in the withdrawal of the offer and the return of any funds that have been raised to the investors.

The issues that both China and South Korea appear to have had with ICOs was the lack of regulation over the fundraising method. As all other areas of business and finance are heavily regulated in both countries, any form of unregulated finance was seen to be representing a risk to the economy and there had also been allegations that ICOs may have been used for money laundering purposes.

In all other countries around the world, ICOs remain unregulated. They are viewed as being more like crowdfunding exercises than they are traditional forms of corporate finance. Most experts agree, however, that it won’t be too long before ICOs are brought into line with other financial markets and placed under the watchful eyes of statutory financial regulators.

There is no question that there have been many examples of very successful ICOs. Nearly $2 billion was raised through initial coin offerings last year and many investors saw substantial returns on their initial investments. The trick is, though, knowing which ICOs to invest in, and when.

The best place to do your research if you are interested in learning more about investing in ICOs is on one of the independent websites that provide ICO reviews, which will provide all the background information about the various offers, plus a review and a rating of each one. Sites like these will also usually have a new ICO list, which will inform you of all the latest initial coin offerings that have recently become available.

Of course, there is risk involved with ICOs, just as there is with any type of investment, but if you invest prudently and you do your homework first, initial coin offerings can be very high yield investments. Just be sure that you only ever invest what you can afford though, because there are no cast-iron guarantees with any type of investment.

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