Risks of participation in token sales
What are the risks of participating in token sales and how to reduce them in such investments, how to choose the most suitable project. And also why the lack of legal regulation is both a risk and a blessing. Consider in this article.
One of the advantages for the development team is the lack of regulation in this area and this has a positive effect on their capabilities. Projects receive sufficient funding to carry out their development plans. However, for an investor, this is always a risk, since his rights are not indicated in the laws of most countries. Nevertheless, the temptation to earn big money is so great that investors still participate in this type of investment.
Therefore, before investing in a token sale, it is necessary to identify the existing risks for yourself.
First, there is a risk that the project team does not have enough experience and at some point will not be able to cope with the difficulties that have arisen in the development of the project. These may be technical difficulties. For example, errors found when testing the interaction between buyers and sellers of their tokens. To do this, testnets are held and its participants are also rewarded.
These can also be tactical mistakes, sometimes leading to disagreement within the team. It should be taken into account that most of the projects are experimental in nature for their field of activity and there was simply no opportunity to gain such experience before. Many teams are pioneers in their fields. And this is also a certain risk in determining the success of an investment.
Secondly, this is a lack of information at the start about the project team, their plans. Sometimes it happens that the development team is anonymous. This does not mean that the project is definitely not worth investing in. On the contrary, this practice is quite common if there are no significant successes behind the teams. Or, if the team wants to avoid unnecessary excitement around the project until a certain time.
Therefore, it is important for the investor to carefully read all the materials, correspondence in the community of social networks of projects. You also need to look for partnerships or just contacts of team members. It is necessary to collect all available information in order to make your personal detailed analysis.
Thirdly, after the end of the token sale, investors face new risks associated with the cost of selling tokens. Here, it is important for the investor to build his strategy for selling this asset, observing the rules of risk-free investment.
First of all, experienced investors recommend immediately selling part of the tokens for the amount spent on their purchase. Then it is already worth watching the price movements and choosing the most suitable time for the sale or the phased sale of the rest of the tokens. There are various strategies, but they depend primarily on the success of the project and its long-term prospects.
In conclusion, a little about the rules that will reduce the investment risks of participating in token sales.
Measure your knowledge about the crypto project, your experience and capabilities. You will have to spend a certain amount of time studying and constantly familiarizing yourself with the team development process. If you have several such projects, the time costs may be higher than your ability to devote so much time to investments.
On the other hand, spreading your savings across multiple projects is certainly better than investing in just one project. Your risks are reduced every time you try to spread your investments as much as possible in several directions. And it should definitely be not only investments in tokensales, but also in other more stable assets.