If you've looked around for opportunities to invest in the crypto space, you've almost certainly heard about presales. Presales have become especially popular in the last year as many new tokens have made their way into the industry. It is not unusual to see crypto headlines talking about presales raising millions of dollars or which ones are pegged to succeed. As Medb Kiely-Cuddy writes, many investors look for new crypto presales to take advantage of.
As someone looking to make the most of cryptocurrency, you're best off knowing what exactly a presale is, the pros and cons of investing in it, and how to go about it. In this article, we'll touch on this and more.
What is a Presale?
A presale, at its core, is an offering of a certain percentage of a token supply to investors before it is rolled out to the wider market. Most cryptos are purchased through exchanges and other such platforms. But before they are listed on such platforms, the developers might choose to earmark a portion of their supply to be sold to investors. This is what we consider a pre-sale.
A major feature of a presale is that the tokens are sold at a lower price than what they would be listed for. If a token is to be listed for $1 on exchanges, for example, the presale might sell it for $0.70 instead. This is in a bid to secure investor interest and tempt them with the promise of more profits in the future. The funds raised from a presale are used to further develop the project's ecosystem and the event can be used to generate buzz for the project. Many presales have gone on to raise millions of dollars and this makes the market even more excited for it. On the other hand, a presale that gains little attention could signal a lack of market interest in the project and could be a sign of incoming failure.
Presales are usually handled from the official project website and last for a limited time. Likely, the prices offered at presale will not be seen ever again and there are only more presales available in the market each given year.
Pros of Presales
So, why are presales so popular among crypto investors? This boils down to several reasons, such as the ones which are as follows:
1. Profit
Ultimately, the main motivation for investing in a presale is the chance to make a profit. Sure, you can technically make a profit no matter what point you buy into a token, but pre-sales put you at a specific advantage. Buying a token at presale means that you will get it at a lower price than its exchange listing. At the very least, you can trade the token as soon as it hits exchanges and be almost guaranteed to make a profit. If the token goes on to perform well in the market and the price only continues to rise, you can make even more profit when you resell it. Those looking to make a profit in the crypto market should definitely look into pre-sales for this reason.
2. Non-Financial Benefits
To draw in presale investors, various projects offer non-financial benefits to them. For example, becoming a presale investor can put you on priority lists for future airdrops, project launches, and so on. There are also exclusive communities for presale investors that future buyers might never be given access to. Then there are things like free merch, Q and A sessions with the founders and so on. If you plan to significantly engage with a project even after it is fully rolled out, coming on board at the presale stage is a great way to position yourself.
3. Supporting Innovation
For some investors, the appeal of investing in crypto goes beyond just money. Some legitimately want to support innovative projects that will go on to change the industry as we know it. This is one of the reasons why developers organize presales in the first place. For a project to stand out among the sea of other tokens, it will need both market hype and money. By participating in the presale, you're helping to ensure that innovative projects can have the initial financial backing they need to succeed. By sharing the word about it and bringing in other investors, you can make sure that the next big blockchain ecosystem becomes a reality.
Cons of Presales
Even though crypto presales have all of these benefits, there are still a few cons that you should be aware of:
1. Loss Potential
Crypto pre-sales have a high profit potential if the project in question is very promising. The project that does well at presale can go on to dominate the market and make lots of profit for the initial investors. But this doesn't happen in every case. In fact, some projects might go on to completely fail after the presale. Projects get delisted from exchanges all the time due to lack of transaction volume and after buying a token at presale, you may end up in a loss. This is why crypto investors are always advised to invest only an amount of money they are comfortable losing, whether buying at presale or not.
2. Scams
The appetite for presales among crypto investors has led to some criminals taking advantage. While tons of presales are legitimate avenues for investment, fake presales do exist that only seek to swindle investors of their money. Sometimes, the token being pushed is entirely worthless and in other times, there is no token to be delivered after customers have paid. To avoid this, it is important to do intensive research about any presale you're considering. See if crypto-related media is reporting on the project and what they say. Search the name online and within crypto communities to make sure that it is legitimate and not a scam.
How to Participate in a Presale
If, after considering these pros and cons, you want to participate in a crypto presale, there are a few steps to take.
First, you need to find an appropriate presale to engage in. While there are hundreds of presales at any given time for tokens of every niche you can imagine, you have to separate the wheat from the chaff. You're best off consulting crypto-focused media which feature lists of the best presales to invest in as these have been vetted and are less likely to be scammed.
You can also engage with online communities of presale investors as they can recommend some of the most promising ones to put your money into. After you choose a presale, make sure to familiarize yourself with the rules. Find out if the presale has a vesting period and if so, how long it is. Also, find out how much the token will be sold for at presale and how long the presale will run for. Once you're sure of all of these, decide on how much you're within to invest in the presale, only choosing an amount you are willing to lose. Following this, purchase your presale tokens and store them securely. Once it is rolled out to exchanges and the wider market, you can choose to sell it or continue to HODL.