Crypto IDO, ICO, etc...
Dernière mise à jour : 5 juin 2021
If you decide to get involved in the crypto world, you will no doubt come across IDOs, ICOs, airdrops, etc. We will try to clarify things for you.
Most of the growth in market capitalization will actually happen before a token or coin is listed in the top cryptos on CoinMarketCap. Therefore identifying promising projects at an early stage is key. This is where the leverage is...
In the crypto world, the are ICOs, IDOs and IEOs...
What are they and why are they interesting for investors?
What is the difference between IDO, ICO and IEO?
'ICO' stands for "Initial Coin Offering". This is the generic term used to describe the public launching of a cryptocurrency.
'IDO' stands for "Initial DEX Offering". In an IDO the launching of a cryptocurrency takes place on a decentralized exchange (DEX). A blockchain project makes a coin's first public debut on a DEX in order to raise funding from retail investors.
'IEO' stands for 'Initial Exchange Offering'. It is a variant of ICOs. An IEO is operated directly by cryptocurrency exchanges, for example the Binance Launchpad.
IDO and IEO are ICOs but their modalities are somehow different.
IEO and IDO are similar, except for the platform that hosts the fundraising process.
On an IEO - a centralized exchange host the “ICO” in-house.
On an IDO the centralized exchange is replaced with decentralized exchange, which means no restrictions on who, when, and from where can buy tokens on DEXs. This is interesting for investors of certain countries who are barred from participating to ICOs (most natably the US).
Usually the ICO/IDO/IEO launching price is very attractive and investors compete to get on a project at the earliest stage possible.
What are the Launchpads?
In the crypto space, there are launchpads that give investors exclusive access to new projects, before they are publicly launched on an exchange like Pancake Swap (for projects on the Binance Smart Chain) or Uniswap (for projects on Ethereum).
Some investors do not hesitate to invest several thousands of dollars to get exclusive access to these launchpads. To do so they purchase the specific tokens of their favorite launchpad. They then stack those tokens with the relevant launchpad. The leading launchpad membership comes at a hefty price.
The leading crypto launchpads are PolkaStarter, TrustSwap, DuckStarter, BSCPad, etc.
The modalities of membership and ICOs vary from launchpad to launchpad.
- TrustSwap offers guaranteed allocation for all its members who fulfil the requirements (valid KYC, file the Whitelist, and have the required number of swaps stacked on TrustSwap's site, i.e. 4,000 at a minimum). The swaps can be purchased on the Uniswap exchange and usually cost between 1$ and 4$ per swap (the market is volatile). The more swaps you stack, the more allocation you receive during the ICO.
- BSCPad guarantees allocation but usually the amounts investors can contribute to is more limited (for example around $10 for a silver tier investor). Then there is a second chance to get tokens after the end of the exclusive allocation phase when every BSCPad member can get tokens on a FCFS (First Come First Served) basis. Considering the number of members, this is very competitive.
- DuckStarter operates on a FCFS basis. But investors only compete in their own Tier. You reach a given Tier by stacking a certain number of the Duck Token. Allocation is more or less competitive depending on your Tier. For example investors in the Gold Tier are likely to face less competition than investors in the Bronze Tier.
- PolkaStarter run a lottery and allocates a certain number of lottery tickets based on the number of Pol tokens that investors carry in their wallet. Investors are not guaranteed to receive an allocation (a right to subscribe).
There are other launchpads but they all operate (more or less) on similar models.
What is the interest of getting into a launchpad?
The price difference between the allocation price and the price when the project is first launched on an exchange, usually a few hours or days after the ICO.
Giving the example of a few projects launched on TrustSwap. People who invested $500 at $0.01 per Chain Games token and resold them for 1.03$ on the day of the public sale (i.e. at the top of the price curb before it started heading back down) would have pocketed over $50,000 a few hours/days later.
Even if the initial price on the day of the public sale looks relatively cheap, the real potential is for ICO investors.
Some will sell back most of their tokens on the public sale day. Others will prefer to hold longer term to enjoy the benefits of the bull market (if the timing is right) and get even more for their tokens. But as you can see in the example above, during the launch the price reached +10,200%. The price after that was still very impressive but had fallen sharply (only +1,385% !).
One advantage of these launchpads is that they filter out the less interesting projects and do part of the due diligence for their investors. So investors are less likely to invest on a 'rug-pull' project (i.e. fake project for which the founder run away with the money just after the sale).
Investors who get involved in ICOs usually know the process inside out and know that they have to stand in front of a computer on the public sale day to monitor the price increase/decrease. For this, they can use tools like Poocoin or BoggedFinance.
What happens on the day of the public sale is that the price of a given token will usually be pumped up, will increase for some time (between a few minutes to a few hours depending on the project) and will start to decrease.
Here is an example. Qanx was initially launched on BSCPad. The price went up for a few minutes, then crashed, bounced back up and then went down.
In a bull market the price of tokens will rarely fall below the initial ICO price. However, when market conditions are bad, the price of many tokens launched on launchpad will fall below the ICO price line. So the ecosystem is not full-proof. Some tokens may also be issued with vesting conditions (for example investors cannot sell x% of the tokens purchased during the ICO for 6 months, etc.). This is a scary prospect in a volatile market where bears loom...
Some investors may do their research, identify 'serious' projects but refuse to pay the expensive entry fees imposed by the various launchpads. Instead they perfer to wait patiently for the price to drop post ICO.
The price of some tokens will never really go down after the launch (for example see the price of the TronPad token launched on June 4th 2021 - due to its utility to be stacked to participate in the Tron launchpad).
However, the price of most token will crash after only a few hours. If the project is serious and offers great potential, it will generally go up again. Patience and faith are required here.
Each investor will have his/her own 'watch list' of promising projects (some may only target the ones already reviewed and audited by launchpads) and target buying price.