When reading up on cryptocurrencies, the term “ICO” comes up often.
An ICO is a way of raising money for a cryptocurrency related venture. Those ventures could involve anything, from trading capital, to creating a physical product.
But do note that ICOs are a “high risk – high reward” game. In other words, you stand to gain a lot. But you must endure financial risks with this type of investment.
Risks involve market volatility and the uncertainty of cryptocurrency accepting companies.
We’ll talk about risks at another date. But for now, we’re going to discuss the basic benefits of investing in an ICO.
Hopefully, this should inspire you to invest one. Or at least, to consider it as a possible capital growth source…
1. Sufficiently Volatile Investments
We say “sufficiently” for an important reason.
When investing capital, volatility is where all the money is made. This is because volatility defines the extent of market swings…
But excess volatility could mean quick gains or losses in capital value.
This is something you do not want. In fact, excess volatility is only useful when you’re trading instead of investing.
With many ICO companies, the volatility is enough to make you money. There are many companies that approach the use of ICOs as a way to raise capital.
This applies especially to startups, where raising money can be tough.
Regardless, even if you’re trading, you still have sufficient opportunities for making quick money. This will actually be our next point…
2. You Can Trade ICO Tokens
There are markets where you can exchange cryptocurrencies for one another.
When joining an ICO, you get tokens that represent your shares in the venture. You can trade those coins away for other currencies.
As a result, ICO token markets are an alternative to other currency markets, including…
3. Diversifying From Forex
One of the problems with forex markets involves low volatility.
The low volatility makes it hard to make money without excess leverage. Thus, forex markets can be dangerous for individuals who cannot handle large margins.
Through an ICO, you can diversify your trading and investing into a new market. And as we all know, diversifying means lower risks…
Also, it means higher rewards, as mentioned in the 1st point about volatility.
Thus, if you’re seeking to expand away from forex, this market is for you.
Bear in mind that you’re still trading currencies. This is something you might be comfortable with, even more than stock or bond markets.
For example, many forex traders/investors do not feel comfortable owning stocks. In fact, they may lack knowledge on how to approach buying and selling stock shares!
4. Purchasing Venture Products with ICO Tokens
That’s right. Not only are you investing in a venture. But you can buy products made by the venture, using your ICO tokens.
This is an advantage, depending on the venture you invest in. After all, not all ICO ventures have a product ready to gather capital…
Many ventures use ICOs to gather capital for a concept product. In other words, you invest before the product even exists in the concrete world.
For that reason, you should pick an ICO venture with an existing product. That way, you get to exchange tokens for an existing product line.
Also, you avoid scam ICO ventures.
For additional security, pick an ICO that uses a well-known cryptocurrency. That way, you can exchange your tokens for a third party service!
For example, if you get Bitcoins as tokens for an ICO, you can exchange those for dollars. Or you can exchange those for tokens in another venture!
5. Low Entry Barriers
This the most important of all the previous. Also, this advantage is the main difference between an IPO and an ICO.
With an IPO, you must be a wealthy enough investor to join the offer. This is because most IPO offers come from established companies seeking very large funds.
With an ICO, you can join with less money than a monthly paycheck. The low entry barrier means that you gain an opportunity to invest early on in a company.
As a result, you can enjoy early increases in share price, without late entrances into a venture.
ICOs – Plan and Study, Like With Any Other Investment
ICOs and cryptocurrency trading are the hot financial trend of this decade.
But, to enjoy them in full, you must never forget to hedge against their risks. So be sure to study the ventures available to you before making a commitment!