A token presale is a cryptocurrency event designed to benefit both developers and investors. During the event, the developmental team raises funds for a crypto project while investors use the opportunity to maximize their profit. However, these benefits are only valid when the token presale is successful.
Presale in cryptocurrency involves selling tokens cheaper before making them available on crypto exchanges. Even though the presale event is designed to benefit every party involved, investors may lose their capital if the token becomes devalued.
Since token presale has its risks, you want to take extra measures before funding any crypto project you come across. Read on to learn more about token presale and how to avoid possible risks.
Types of Token Presales
There are two major types of token presales, which are highlighted below.
- Investor-only cryptocurrency presale: This presale is usually available for a particular group of investors, especially the wealthy ones. These investors are promised a massive profit in return for their capital, whenever the token appreciates.
- Open-for-all token sales: This token type is not limited to any group of investors. It’s open to retailers who want to buy coins at a cheaper price before the ICO.
Difference Between a Token Pre-sale and ICO
It’s expedient to bear in mind that the token presale is not the same as Initial Coin Offering (ICO). The presale occurs before the ICO, so the company can have sufficient funds to cater to the latter. During a crypto project ICO, the fundraising target is usually higher than presale’s, so tokens will be sold at a higher price. More so, many investors who participate in presale events often sell their tokens shortly after the ICO.
Developers also organize presales to target some particular group of investors and identify every possible challenge or problem. This will help investors to fix bugs before the ICO sales, which will be carried out on a bigger scale. More importantly, the project team can use the feedback from the presale to improve its marketing strategy and fundraising goals.
Even though ICO and presale have certain differences, the marketing goals are often similar. As a result, the crypto community is encouraged to verify presales and ICOs credibility, and avoid falling for offers that seem too good to be true.
Benefits of Crypto Presales
One of the major benefits of crypto presale is allowing investors to own coins at a low price. If the project eventually attracts more users and the token rises in value, investors are likely to sell these tokens at a higher price.
Most presale organizers also provide special rewards and incentives to investors. Investors can exchange the tokens on a trading platform before the official launch. Your voice will also be heard, as you may choose to join the project’s community, where you make critical decisions or suggestions concerning the project.
Crypto presales don’t only provide benefits to investors but also to the project developers. It helps them to understand the market better and how to catch investors’ attention. Also, crypto projects gain massive social media popularity during presales. This publicity will put the token in the face of potential investors, thereby expanding the crypto community.
2/ Presales are a form of fundraising conducted by projects/protocols to raise funds for the team.— CJ (@CJCJCJCJ_) April 11, 2023
They give you tokens in exchange for assets/cash that the protocol will use to fund its expenses (eg marketing, salaries, development etc.)
How to Participate Safely in a Token Presale
One of the safety measures required before participating in a token presale, is to confirm whether the token is a commodity or security. If the token reflects a future value or investors are rewarded based on others’ efforts, it will likely be listed as a security. According to the Securities and Exchange Commission (SEC), every security token must be properly registered under the law.
Depending on the facts and circumstances, the offering may involve the offer and sale of securities. If that is the case, the offer and sale of virtual coins or tokens must itself be registered with the SEC, or be performed pursuant to an exemption from registration. Before investing in a presale or ICO, ask whether the virtual tokens or coins are securities and whether the persons selling them registered the offering with the SEC.SEC’s Investor Bulletin 07/2017
Step-by-Step Presale Participation Process
Below are the other processes involved in participating in a crypto presale.
Step 1: Register with a cryptocurrency exchange.
The first step is to register an account with a cryptocurrency exchange. You should consider choosing decentralized exchanges, as it eliminates the presence of a third party, allowing you to transfer directly from your crypto wallet. Examples of popular decentralized crypto exchanges are; Uniswap, PancakeSwap, Kyber Swap, and DyDx.
Step 2: Prepare your wallet.
Depending on your storage plan, You can use a cold or hot wallet. A cold wallet provides maximum security, allowing you to store your crypto for a long time. On the other hand, a hot wallet allows users to access their crypto assists, especially for trading purposes. An example of hot and cold wallets are MetaMask and Ledger Nano, respectively.
Step 3: Monitor the presale opening.
Organizers of the token presale usually notify the public of the opening time and day. It’s essential to bear in mind that promising tokens are usually sold out within a few hours or days, depending on the crypto’s potential market value. So, we recommend that you invest or buy at the specified time.
Step 4: Make your contribution.
Convert some amount of cryptocurrency in your wallet to get some tokens. Most presale developers allow buyers to use either ETH or USDT. You may also buy some ETH with a credit card or bank transfer. Once you are done, go ahead to connect your wallet to the presale dashboard and proceed to buy the presale tokens.
Step 5: Follow the progress of the sales.
Presale is usually in stages, and most organizers increase the token price gradually. This is particularly true for presales that have gained the attention of many of the crypto community. Buyers will be able to claim their tokens once the presale is over.
Best Practices for Conducting a Token Presale
Since many developmental teams aim to attract investors during the presale, it’s expedient to incorporate certain practices to get the best result. Some of these practices are listed below.
- Make sure to present a complete project or prototype. This will cause investors to trust in your project better while putting it to the test.
- Create solid cybersecurity and governance measures, to improve security levels.
- Create a professional project team that understands the goal of the presale and is ready to deliver.
- Ensure the presale and ICO comply with the regulations or legal requirements.
- Be transparent in your dealings with your investors.
Examples of Presale Events
Every investor looking out for presale events will undoubtedly come across several options. However, here are three examples of certain crypto presales for 2023. Kindly bear in mind that these tokens are just examples, and we recommend doing your own research.
Evil Pepe Coin: Evil Pepe is a meme coin that’s built on the Ethereum blockchain. The developmental team has been marketing the Evil Pepe presale across social media platforms, since its announcement on the 18th of July, 2023.
According to the team, they aim to exceed the $100,000,000 market cap during the 3rd phase. Experts say the Evil Pepe presale is riding on the hype around the Pepe coin, having raised $100,000 in the first 24 hours of presale event.
Spectra: Spectra is revolutionizing the Fintech industry, leveraging Al to provide a decentralized, transparent, democratic, and cost-effective platform for investors. The team aims to sell up to 125,000,000 SPCT at $0.011 per token during the second presale stage.
BTC20: The BTC20 team is marketing this token as a green ERC-20 version of Bitcoin built on the Ethereum blockchain. The team is targeting a total supply of 21 million tokens and getting up to 6.05 million tokens in presale for $1 per coin.
Even though presale is an opportunity for investors to buy tokens at a low price, some of these events can be deceptive. Thus, every investor is encouraged to weigh the risk to prevent them from losing their entire investment. You can figure this out by examining the tokens’ market demand. A cryptocurrency with a strong use case will most likely be successful, with a high possibility of yielding a massive Return on Investment (ROI).