ICOs Make Sense For Many Users, But Others Might Want to Wait
There have been very few ICOs in the history of cryptocurrency where buying into the ICO netted a better price than one could have got on the open market.
In other words, although some ICOs are worth supporting (just like some crowdfunding projects are worth supporting), in terms of dollar value only… it is rarely worth buying into an ICO if you know you would be willing and able to purchase the tokens after they go on the open market (if you don’t think you would, then its a different story and the ICO makes a ton of sense).
Thus, if you would be willing to find an exchange a token trades on and obtain it that way within the first few weeks of it going on a given exchange (often including, and sometimes limited to, EtherDelta), you are generally better off skipping the ICO and buying the token about a week to a month or two out on the open market.
UPDATE: Everything on this page is case specific… and the SEC cracked down on ICOs in 2018. With that the landscape has changed. So keep that in mind when dealing with ICOs.
TIP: Sometimes a pre-sale will offer deep discounts. If you have access to a round before the public round, it may be worth buying early.
TIP: If you want to make shopping for tokens easy, use Coinbase Wallet. It has an interface for DApps and a wallet for all Ethereum-based assets. That means you can use decentralized exchanges like EtherDelta with ease.
Granted, that is a lot of ifs, but it is none-the-less true. Not only does it fetch you a better price on average, it is also avoids you locking up your investable funds for months and missing gains in a coin like Ether (ether is used to buy into many ICOs).
Here I have to note, if you do want to wait until after the token goes live to buy, you should almost never buy a token right after the ICO (as prices tend to be high for a moment). What you should do instead is wait a few days at least, perhaps a week, but as long as a month or two before buying (and inversely, generally it can be fruitful to sell a token right after the ICO and then buy again later).
I get that this isn’t the ideal thing to say, as I want this all not to be the case… but, it has historically been the case, and this is a place to discuss facts, not wishes.
With that said, I should reiterate this point: if your skill level isn’t at a place where you can use an exchange like EtherDelta fluidly, and/or if you don’t mind buying into an ICO and then holding until the token makes its way to a reputable exchange, then there isn’t much to worry about here.
Sure, you’ll miss a window of opportunity, but that window becomes pretty theoretical if you don’t have the ability to jump through it.
Further, if you LOVE an ICO, you might see it as a risk to ignore the pre-sale and wait.
However, if you aren’t worried about missing a token in a worst case, and you aren’t worried about navigating some token trades on a site like EtherDelta, and/or you are thinking about this all just in terms of dollar value, consider skipping the ICO phase and buying the same token on the open market (or entering during an ICO and then very quickly selling off your stack for a profit).
The problem with ICOs is that they pose risk upfront, and then generally see their token prices decline afterwords.
That one two punch makes even some really interesting ICOs lackluster in practice compared to other methods of obtaining the tokens. Tokens that really should do well, and companies that really do offer something interesting, still can’t avoid the reality of the market (the reality being that early investors dump tokens and then price declines until that token can get picked up on a decent exchange or two).
Thus, it really doesn’t matter what the discount is, 9 times out of 10 the token will be cheaper later. Not only that, but 9 times out of 10 your Ether (or whatever you use to buy the token) will be worth more.
Thus, this one, two, three punch generally goes from lackluster to actually kind of frustrating.
Imagine buying into an ICO when Ether was $270, then getting tokens that are now worth $100 while Ether is now worth $370. The math is very far from being in your favor, you lost $100 of gains in Ether and you lost $170 in value in the token. That is going to require these tokens to really rally for you to get your money back.
All of this said, some tokens really do rally. There have been ICO tokens that have gone up 1,000%+. Thus, no one should be feeling bad about supporting an ICO they dig and sticking with it. However, in terms of a pure money making opportunity, like I said, 9 times out of 10 you want to buy the token on the open market after launch. Your Ether will likely buy more tokens, and the tokens will generally be cheaper.
The bottom line being: almost every time buying into an ICO offers less value than buying the token after it launches. I can’t think of any examples of this not being the case for those who can trade quickly enough.
Now let’s be clear, this could all change with the right ICO, and certainly if you bought Ether or Stratis in the ICO phase you have very little to complain about, but as a general rule:
- Entering ICOs are hard IC-nos 9 times out of 10 (unless you plan to sell quickly or don’t mind holding through the initial dip and going long).
- Meanwhile, that said, if you don’t mind holding through the initial dip, or if you know you wouldn’t use EtherDelta, then its a whole other story. In those cases the right ICO might be a hard “heck yes.”