A presale is what it sounds like — it is the selling of crypto tokens at a particular price ahead of their initial release. Some developers hold a presale before the public release of their coin. Their reason is to create a buzz and formulate some recognition.
We will frequently use the term ICO — initial coin offering, so it is essential to know it. An ICO is when a coin is made available to crypto exchanges like Binance for the first time.
However, an ICO is not the first time investors can get a hold of the coin. This is where presale comes in. A presale essentially precedes an ICO.
This article will further explore what it is and delve into the workings of the crypto presale to give you, as a trader, a greater understanding of the concept.
What is a crypto presale?
Investors can buy tokens or coins before their release into public circulation. However, only specific investors can engage in crypto presales, which lets investors buy crypto at a much lower price than currencies such as Bitcoin. As touched upon earlier, a crypto presale comes before an ICO. There is usually a price surge once the token goes public. So, investors taking part in presales can benefit as their token, bought at a comparatively low cost, may increase in value exponentially.
An example of such a process is individuals who invested in a presale of the Bitcoin back in 2009 when it first came out. These people are now millionaires.
What are the types of crypto presales?
There are two primary types of crypto presales, defined as follows:
- The investor-only token sale
It is specifically for more extraordinary investors who want to invest in crypto in its initial stages. It is usually more expensive but benefits those seeking to invest in a new crypto venture, such as discounts and/or bonuses not available in ordinary token sales.
- The token sale for everyone
This second type of presale is available to everyone. But, again, retail buyers can get the tokens before they go public.
Why buy from a crypto presale?
The most obvious reason why investors look for presales is that tokens are available at a much lower price, which they can later sell at a much higher price and make large profits. The price of the tokens also increases once they go public, which adds more value to them and justifies the investors’ sales at a greater cost.
Many protocols also prefer presales. A presale allows them to develop their projects quicker – by hiring more people or creating marketing campaigns due to the substantial rise in funds. For example, TFLOW raised $400k from 300 investors because of its presale.
Presales are very beneficial, but you have to use them with caution. We will now discuss some risks that accompany a presale.
What are the risks of crypto presales?
If you did not already know, crypto presales are risky, and we utilize them carefully. The risks are not only for investors but also for those who hold the presales. Let’s look at both of these individually.
Risks for investors
Firstly, presales present huge risks as the token used for investment is usually new and unproven. Numerous cryptos emerge every month but rarely do they get adopted.
The token or coin must be successful for the investment to be worth it. But there is no guarantee that the currency you are investing in will be successful in the future. It could go into the void, despite receiving an influx of investments. What is the point of spending a noticeable amount on a coin that will go nowhere in the future?
Besides this, many businesses and institutions do not accept cryptocurrencies. Right now, companies only accept Bitcoin or Ethereum, which too only select businesses. So, you can never ascertain whether your invested coin will be accepted. As a result, it could just end up with a worthless investment.
Furthermore, the risks of general crypto investments also apply to presale crypto investments. These include limited protection for investors and minimal protection and regulations involving cryptocurrencies.
Risks for crypto presale holders
Often, investors take place in what is “dumping .”This is when they do not believe their project will occur from the beginning and want to get rid of it. So the investors raise the token price, receiving profits, but for tokens that are not useful.
Of course, it is considered fraudulent, and the prices rise artificially. You can never be sure that it will not take place.
How to buy cryptos from a presale?
Despite the risks that come with presales, people still prefer buying from presales, as with anything. Arguably, for the right reasons. If you are one of them, keep reading to learn how to buy cryptos from presales.
Individuals participating in presales are commonly active members of the crypto industry. It allows them to immediately get the news of a presale and jump into one instantaneously. So, for example, platforms like Reddit, Twitter, and Telegram can quickly get the word out.
In any case, make sure you have done proper and thorough research of current trends of presales. Moreover, you will have to act as fast as possible because the potentially more valuable coins sell out immediately.
Presales come with tons of benefits, such as being the gateway to magnanimous profits as investors can buy coins at a low cost and charge much more when it is time to sell. Crypto presales, however, also come with risks, as we have already discussed.
After much thought and analysis, the wise decision would be to participate in presales. After all, presales are lucrative for investors and the coin’s development team. Remember to only invest in a presale if you can afford the losses.