Two very important reasons people invest in ICOs would be because of the utility values of the tokens and the financial prospects they would have gained once they get listed on an exchange. Rest assured, the most commonly observed trend is for people to invest for the profits. From the sound of it, the fact you’re here means am right.
After your first time investing in an ICO, the high surge of unrealistic expectations coursing through your mind can make you restless, even if it’s a $10 USD value contribution; especially when the hype around the Initial Coin Offering is so high. But you can make decent profits from even a ‘shit coin’ that ends up being listed on an exchange. It all depends on you and your motive and strategy.
Some people prefer to invest as short-term investors in some projects and at others would make them dream big – as big as buying a lambo (short for Lamborghini) so they hodl for a very long period of time with the perception that the values of such tokens would increase by 100x or more over.
But after looking so hard and studying diligently to invest in the right project, to ensure that you don’t waste time and resources, when and how do you get your profit from the ICO investment?
The question ‘when’ is as important as the other ‘how’ as I have had very unpleasant experiences with many cryptocurrencies and each time my advice has turned out to be sort of a hindsight rather than one that I personally profited from.
Even though I have had many successful investments, those rare ones that I took for granted and may have invested a few dollars in but liquidated too soon because I wasn’t sure the project had what it took to scale. Shockingly, my guts were wrong time and again – and trust me, that rarely happens.
From a more common experience and analogy, imagine the early adopters of bitcoin who bought BTC when it was around $0.003 USD per coin in late 2009 to early 2010 and after it rose to $31 in July of 2011 dropped to $2 USD in December of the same year. if they had panicked and sold off their stash due to FUD, they would certainly have regretted that decision just a few years later.
Although from $0.003 USD to $2 USD is quite a lot of profit, that’s like approximately 665.67%. Meaning an investment of $100 USD would give 33,333.33 BTC at the base price of $0.003 USD. Once the price rose to $2 USD per BTC → simple math => 33,333.33 x 2 = $66,666.66 USD.
Wow! From a $100 USD to over 66 grand in just a year, that’s quite the luxury investment (a fulfillment of the American dream), a couple of more digits and I could buy me a yacht. See what I mean by the lambo dream? But now, seeing how well BTC has been doing over the years to this point, they might throw themselves over with a stone into a well.
Another very similar and more recent altcoin that made such a huge leap would be Ripple (XRP). This coin was less than a dollar after the ICO and as at January 2017, it was around $0.006. In just over a year it was trading at $3 in early January 2018. Seeing the pattern? Undervalued and then BOOM! If you had invested $100 bucks, do the math…
I really don’t want to relive that experience, I sold early!!! Although at the time of this writing, it has dipped below a dollar to about $0.9, so talking about profit, it’s more like knowing when to enter or exit – or even better, your personal ideology of what profit is.
My point is, there should be some strategy to how you invest and cash out your profit, you could call it a systemic way of trading ICO tokenized assets, but be sure you maximize the opportunities as they present themselves.
Now, I would attempt to divide the profits that could be earned from ICO investments into three groups:
An incentive used by most ICO projects as ‘bait’ to lure early birds to the crowdsale. Usually, most projects would reserve an exclusive huge amount of bonuses to angel investors and early adopters of the project during a private sale, oftentimes up to as high as 50% discounts or more.
This way, they could collect more funds from very few investors which are used to run other logistics of the project before the presale and the main sale begins.
While the presale may also come with bonus structures, the main sale usually doesn’t have a bonus attached to it in most crowdsale events.
Some folks are content with the 30% or 20% early investment and so they don’t bother about the listing on major exchanges; they find an early exit with EtherDelta, which is like a black market for ICO tokens. They may even sell lower than the ICO price just to make a little over what they invested. So, it’s all about the bonuses!
Another form of profit that can be gotten from investing in ICOs is when the digital asset is perceived to have some worth and is left for a period of time and then that value appreciates from the amount it was sold during the token sale event to a new all-time high.
Investors at this point will liquidate at a price they are comfortable with in order to get both their capital and the ‘interest’. Say I was part of the early adopters and I didn’t liquidate early, I get bonuses plus accrued value interest – more profit.
This way, investors are the ones to determine their exit strategy (that is when they would sell off their tokens and part ways with the project). Usually, this takes right about 1 to several weeks after the ICO has been listed on a reputable exchange market and that they have become tradable digital assets.
The last form of profit is perceived as one in which people can use the asset as a trading asset pair with other alt coins or with BTC. This way, you can liquidate to the base pair either in an attempt to increase your stash of BTC, ETH or other acceptable base pair and also do a systemic buy on the dip and sell on the peak cycle – with cryptos, there’s a lot of that – I think it’s called pump and dump.
Traders use ICO investments to get in early and as an easy way to get very good amounts of the tokens ahead before they are listed on exchanges. Instead of waiting for the tokens to be listed and then buying them, it might cost more and deprive them of the leverage of higher returns on investment.
So once you have determined the type of investor you are, the steps required to withdraw or cash out your investment is pretty easy. All you need to do at this point is to know whether you want to trade it for another asset, which is probably more fungible than the token in your possession or you want to withdraw to USD or even your local currency – it’s all possible.
First, I must have assumed you had received your share of the tokens in an Ethereum ERC-20 or ERC-223 compatible wallets, and that the tokens/coins are not on their own private blockchain. Else, even if they are, the steps in transferring to exchanges where they are listed and doing the transaction are not that hard; it’s quite simple.
If it’s an Ethereum based token, you would have received the equivalent token you bought plus the bonuses into your ERC-20 or ERC-223 compatible wallet. Sometimes, they don’t show on the list with other tokens, so you might have to add their identity manually; that is, the contract address, the decimal units, and ticker.
Once you can see the token in the wallet you can transfer to any of the listed exchanges where your token is currently traded with other alt pairs or BTC (most alts are traded to BTC as a base pair). And the trade from here on is simple. Simply fill in a buy order and voila… the exchange helps you to process the funds to you. The equivalent funds are sent to you exchange wallet which you could withdraw to any other wallet.
The steps to cash out to USD or your local currency banks is quite similar to that of the above steps, only this time, you would have to ensure that your local currency is listed amongst the exchange’s acceptable currency like the Chinese Yuan (CNY), the British Pound (GBP), or the Euro (EUR), amongst others.
Otherwise, you may have to look for a local exchange site that accepts major crypto exchange to your local currency like Localbitcoins, so the step would be a little different as you would have to convert from the new altcoin to BTC and then sell off on the local exchange to get the equivalent worth in your currency.
Usually this process will incur a lot of fees in-between – from your ether wallet (gas), to the exchange (some charge deposit fees), once the trade to BTC or ETH is done, some exchanges charge other fees and then from the exchange to the other local exchange (another fee might be incurred).
In a nutshell, cashing out profit earned from an ICO can only be achieved by a peer-to-peer facilitated exchange platform or directly from your wallet to someone else’s address directly.