By If there’s a topic of discussion regarding investing that has gained traction over the past years, it’s cryptocurrency & ICO’s. In 2017 after a massive run across the board, cryptocurrencies have solidified its place in the spotlight for the comings years as an asset to keep your eye on. If you’ve missed out on a great entry position to take some profits along the way, another great alternative is investing in an ICO.
An Initial Coin Offering, also commonly referred to as an ICO, is a fundraising mechanism in which new projects sell their underlying crypto tokens in exchange for bitcoin and ether. It’s somewhat similar to an Initial Public Offering ( IPO ) in which investors purchase shares of a company, but in the form of tokens which represent those shares.
ICOs are a relatively new phenomenon but have quickly become a dominant topic of discussion within the blockchain communities. ICOs have, and currently are, undergoing regulatory scrutiny due to the increasing number of tokens that have later been classified as securities. The most important thing to take note of when investing in an ICO is whether it has passed the Howey test. If the token has passed the Howey test it will then be labeled a security and cannot be traded without a valid license.
ICOs are regulated in some countries, legal in others and banned in several too. China and America have banned ICOs with regulation pending as the SEC and government conduct internal research. This is due to the high scam rates of ICOs as well as the low success rate, which many believe are correlated.
While many steer clear of investing in ICOs, we believe that with the right amount of due diligence, it can form a strong part of your crypto portfolio and returns may exceed that of many crypto and traditional investments.
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