Token Pre-Sales can be one the most lucrative investments in the cryptocurrency sector if you know what to do and how to avoid scams. Here is what you need to know.
Do Your own Research
The most important part about investing in any type of token sale is to inform yourself about the projects that solicit funding from you. After all, you wouldn’t blindly give money to any stranger, just because they promise you a great return, right? On the web, there are numerous lists that compile token sale information, such as our curated list of the top upcoming token sales.
However, just knowing the name and the general idea of a crypto project is far from enough. First of all, you should take a look at the project’s landing page. At the very least, it should look and feel professionally like a modern landing page, but that alone does not necessarily mean that the project is serious. If the landing page and its contents look generic and do not convey any hard facts about the project’s mission, you should be very suspicious.
Next, read the whitepaper! While a whitepaper can be very technical and difficult to understand, even for seasoned crypto veterans, it should give you some insight into the project’s business model and tokenomics. This entails a breakdown of the initial token distribution, whether there is a fixed supply, and how the token sale proceeds are going to be used.
Furthermore, the whitepaper should give you information about the project’s raison d’être. After reading the whitepaper, you should be able to formulate, in your own words, what the project does and why it is needed. If you’re not able to, investing in that project might not be a good idea. In general, don’t invest in a project if you don’t know what it does. For this purpose, a good whitepaper starts with a mission statement that mentions a specific problem and how the project intends to solve this problem.
Get whitelisted as early as possible
The specific procedures of token sales vary from project to project, but typically, there are multiple sale rounds, starting with a private sale. This round is typically reserved for institutional investors who pledge a rather large sum of money. In return, the private investors get a huge discount on the final sale price. While you are likely not invited for the private sale, the outcome of this round can give you a hint about whether this project is worth investing in. If it manages to secure funding from institutional investors, you might be looking at a unicorn.
Next is usually a pre-sale round that distributes a larger amount of tokens, but for a lower discount. While back in the Wild West days of crypto, the pre-sale was not so different from the public round, nowadays it has become a lot harder to get into the pre-sale round. Typically, the pre-sale requires investors to whitelist themselves by filling out a form asking some not too personal questions, such as your country of residence. Note that some jurisdictions such as the US are often excluded due to regulatory reasons. Sometimes you will be asked to disclose the amount of money you want to invest, and to help with marketing by sharing the project’s social media posts.
Note that projects in this stage can be somewhat picky on which investors they will whitelist. Also, they are usually not transparent about the whitelisting process. In order to increase your chances, submit your details as early as possible to express your interest in the project. If you are asked how much you want to invest, it is generally a good idea to pledge a somewhat higher amount than what you actually want to invest. During whitelisting, this is completely non-binding and you can decide to lower the amount any time once the sale starts. Furthermore, it can help to have an active Twitter account with original crypto-related content and a decent amount of followers. Needless to say, you need to meticulously follow the whitelisting instructions, so make sure to check the project’s website and complete every step of the whitelisting process.
After the pre-sale, there is one or more public sale round that distributes the remaining tokens at little to no discount. Sometimes, you will be asked for a whitelisting as well. Therefore, plan ahead and fill out the form at least one week before the sale starts. When it’s finally time, check back at the website and you should find a DApp interface where you can connect your wallet to and make your investments. Never send money directly to any address or smart contract!
High Risk, High Reward
Possibly the most important part about investing in token pre-sales is risk management. Never invest a substantial amount of your personal wealth into a single project, no matter how convinced you are that the token is going to boom. As a rule of thumb, ask yourself about how much money you would still be comfortable with losing if you placed it on a Roulette table at even odds. If you’re a regular poker player, your average stack size or twice your average tournament buy-in is a good indicator.
In general, this would give you a clue about how much to invest for each token sale. It should hurt at least a little bit to lose the money because that’s how we learn to make smart investments. However, even a total loss should not do any substantial harm to your personal finances. Also, remember that there are much fish in the pond and the next high-potential is going to start soon. When you don’t overexpose yourself to a single project, you will always live to tell the tale, and to make another investment at high risk, high reward opportunity.