The Risks Of Investing In ICOs: What You Should Know
Risk of investment in the initial coin offers (ICO): What should you know
In recent years, the financial world has noticed an increase in innovation and technological progress. One such phenomenon is the increase in the cryptocurrencies that have attracted a major investor worldwide. However, with this excitement, there is a related tendency: investing in the initial coin deals (ICO). In this article, we will go into the risk of ICO, helping you make a reasonable decision before immersing itself in the cryptocurrency trading world.
What is ICO?
The initial coin offer (ICO) is the mechanism of collection of funds used by companies to collect capital from investors in exchange for a certain amount of their home cryptocurrency. This process includes the sale of chips that represent the title to a new project or startup, often promising to get a great return on investment. ICO usually includes a pre -sale phase when chips can purchase cryptocurrency before official start.
Investment in ICOS risk
Although the seduction of cryptocurrencies is undeniable, investing in ICOs is at high risk. Here are some of the most famous to consider:
- Lack of regulation : The cryptocurrency market is essentially unregulated, so it is difficult for investors to know what they are entering. This lack of maintenance can cause fraud, pump and combed schemes and other financial losses.
- Without proper decent inspection, investors may support a project that is unlikely to fail or even collapse.
- Token Flipping : The ICO market is known for the flip of chips when investors buy chips at an increased price and then sell them at a higher price before the project begins. This can cause major financial losses.
- Security Risk : Investing in cryptocurrencies pose a risk of security such as hacking, fraud and cash related.
- Liquidity risk : ICO often has short sales periods, making it difficult to sell your tokens quickly if necessary.
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What to do before investing
If you are going to invest in ICO or trade in cryptocurrencies, there are some fundamental steps here:
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- Understand the sign : Meet the token’s purpose, in case of use and offer to avoid possible fraud.
- Increase your portfolio : spread your investment in multiple wealth to reduce risk.
- Set real expectations
: Understand that investing in cryptocurrency is a risk and no guaranteed profit or return.
Conclusion
Although the perspective of cryptocurrencies is interesting, ICO is careful and skeptical. The risk of investing in the ICO may be high, including a lack of regulation, unscrewed projects, inverted token, security risk, liquidity risk and tax complexity. To protect yourself from this risk, carefully explore, check the project, understand the token, diversify your portfolio and set real expectations.
As the cryptocurrency market changes further, it is very important for investors to remain informed and vigilant. By following the measured approach and knowing about the potential risks, you can make a reasoned decision on investing in ICO or trade in cryptocurrencies.