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Explaining
Crypto Presales
These are
events that take place at the beginning of a cryptocurrency’s life, where it is
sold to some investors who intend to trade it for other currencies when they
become available, but before being listed on any exchange. Most of these sales
occur before an initial exchange offering or wider public launch.
In a
presale, tokens are usually sold at a price lower than what is expected during
listing. However, in exchange for this discount, investors bear risks such as
those associated with early stages like project delays, regulatory changes that
may render the project illegal and non-compliant or simply failure of the token
to gain market recognition.
Presales are
typical for decentralised finance projects, gaming tokens, as well as
infrastructure platforms that create and sell new blockchain tools.
How Crypto
Presales Work
The majority
of crypto presales take place on the project’s website or through a launchpad
platform. Investors buy tokens by connecting their crypto wallets and using
popular cryptocurrencies such as Ethereum, USDT, or USDC.
Presales
often have multiple phases with increasing token prices. Projects set hard caps
to limit the maximum amount of capital they can raise and soft caps that
determine the minimum amount required for the project to proceed.
Tokens
bought in presales may be subject to a lock-up period. This vesting schedule
aims at preventing early investors from dumping their shares immediately
after the launch and causing sharp price falls.
Why
Projects Use Presales
Presales
offer startups with early funding options that do not depend on traditional
venture capitalists. They also enable them to create a user base even before
launching the product itself.
Additionally,
presales can act as indicators for demand levels. A strong turnout might lead
to exchange listings or partnerships, while low interest could signal doubts
over the project’s future viability.
Risks
Investors Should Understand
Investing in
crypto presales is riskier compared to purchasing established tokens. Many
presale projects are still under development and have little or no history
behind them. Some fail to launch at all.
There is
also limited regulatory oversight in many jurisdictions. Unlike initial public
offerings for securities, crypto presales often take place within a legal grey area
that could expose investors to non-compliance risks.
Where
Crypto Presales Fit Today
It is most
appropriate to consider crypto presales as high-risk and early-stage
participation in blockchain projects. Although they are crucial for supporting
innovation, such investments require thorough examination. By understanding the
mechanics of presales, investors can differentiate between real projects and
mere speculative bubbles amidst the changing landscape of cryptocurrencies
today.