Isn’t becoming an angel investor and succeeding as one the dream? The crypto space makes it as accessible as ever. Mind that all the pitfalls that unsuspecting investors-to-be fall for are still present. Read the crash course for finding and vetting presale cryptos by the ChangeHero team to hunt the best crypto presales with no sweat!
Key Takeaways
- Crypto presales are exactly what the name implies: a pre-launch sale of a portion of a new token supply to early investors.
- Presales allow you to buy promising crypto assets at a discounted price. The drawback is the lack of a proven utility or value of the project and the risk is that the presale token will not gain any value.
- Moreover, there are legal and fraud concerns that token holders should bear in mind. Presale investors have to exercise caution and vet every project when investing in crypto presales.
Breakdown of Crypto Presales
Much like its regular counterpart, a crypto presale is an event that lets investors buy a share in blockchain projects before their launch. The share is represented by the tokens which get distributed to investors after the launch or crypto exchange listing.
Soon after the launch of Ethereum in 2015, when tokens and smart contracts became a thing, so-called Initial Coin Offerings (ICOs) took the crypto world by storm. Smart contracts ensured that the distributions would occur when the necessary conditions would be met.
However, due to the novelty of the industry, there were no investor protections, and fraud was rampant. The combination of the eventual but inevitable bust of the ICO boom and the crackdown from the regulators caused ICOs to stop being a primary method of launching cryptocurrency projects.
Nevertheless, crypto presales still happen today, and remain a great way to become an early supporter in a promising endeavor.
How Does a Cryptocurrency Presale Work?
Crypto presales are normally held on special platforms or even cryptocurrency exchanges, which act as an intermediary between the representatives and investors-to-be. Some of them require users to go through identification, while others may not.
Alternatively, a crypto project can hold a presale on its official website but in that case, the security of the transaction rests squarely on the vendor.
If satisfied with the presented information about the project raising funds in the presale, the investor purchases it for the designated price. However, they do not receive the pre-sale tokens right away: instead, their contribution is recorded on the blockchain in a (hopefully) secure smart contract.
When the launch comes around, they become able to claim these tokens unless they are subject to a cliff or a timelock.
The amount of presale tokens to be distributed in each round and even the price is normally known in advance. The closer to the launch date and wider the audience, the less exclusive the offer and the higher the presale price tag. Nevertheless, as long as it is a presale, the price is intended to be lower than after the launch or listing.
The rule above applies to crypto presales with tiered pricing. Tiers can progress with time or based on the amounts of tokens sold. It helps kickstart the campaign in the early stages of fundraising while building momentum until the presale concludes.
Admittedly, tiered pricing capitalizes on the fear of missing out (FOMO) but still provides the incentive to participate in the presale with the promise of discounted prices for an asset.
The alternative to tiered pricing is a fixed price model, or using the same price tag for the entire duration of the presale. It is exactly what it sounds and has the benefit of lacking the confusion that comes from the constantly changing price of tiered pricing.
Reasons to Hunt Crypto Presales
Like a regular presale, there are inevitably risks involved in investing in a project that has not delivered anything yet. So what makes this risk worth it?
- Discounted token prices. Almost always, tokens worth their salt start trading on crypto exchanges for a price higher than in a presale.
- Early entry into promising projects. If you do vetting right or just stumble into a lucky streak, the growth potential can blow any other strategy out of the water.
- Extra bonuses for early investors. Some crypto presale projects offer additional incentives to raise capital, especially in the early stages. Examples include extra tokens or exclusive access to platform features.
How legal are crypto presales?
What about the crackdown on ICOs we briefly mentioned at the beginning of the article? Does it mean that there is something about the legality of the subject of crypto presales?
The short answer is that there is nothing inherently illegal about crypto presales. However, local regulators might have some issues with the crypto presale tokens constituting investment contracts. In other words, depending on the jurisdiction, these tokens can be considered securities.
This is the reason why large-scale projects such as Tezos required presale participants to go through identification. Smaller token presales tend to circumvent this step, hoping the regulators do not come after them (or not entertain the possibility at all).
How safe are crypto presales?
The safety and security of crypto presales is another question entirely. The presence of regulation could help dissuade malicious actors but not prevent fraud from happening. Likewise, the team’s reputation and the crypto community vetting can act as safeguards even if no clear regulations are in place.
The most common bad-case scenario would be the team disappearing with investors’ money. A less likely but still present concern is the misuse of personal information, especially if the presale requires you to provide sensitive information for KYC purposes.
Even without explicit fraud, a presale can end up losing your investment. If the project does not manage to break even or develop into something useful, the presale crypto tokens will barely be worth anything. Although not exactly a crime, this is still an ever-present risk for crypto investors.
What can you do to reduce the chances of a crypto presale failing or scamming you? Crypto community members suggest checking if the team is doxxed or verified, or in other words, not anonymous. It is safer if you can check the track record of the people whom you are going to give money.
Seeing what others say about the project and the presale itself can also help you not fall into a trap. Of course, not all buzz is going to be trustworthy. Online forums or independent blogs tend to be more reliable than social media where spam and aggressive marketing are rampant.
Getting to understand tokenomics is also a good idea. Things that should throw you off can range from an extremely large supply to a high FDV ratio and ridiculous returns on passive rewards, to name a few examples. The topic is too extensive to be summed up in this article but we encourage you to learn more about it if you are seriously considering participating in cryptocurrency presales.
Where to Find Upcoming Crypto Presales
New crypto presales being distributed all over the internet can prove troublesome if you want to check out as many crypto presales as you can. Luckily, a lot of resources and social media channels are dedicated to highlighting promising and best presales to invest in.
- Launchpads and aggregators. This is not the first place a lot of guides recommend but we believe you should start with those. Intermediaries like these often act as an additional securing factor proving the legitimacy of the token presales.
- Forums and communities. Of course, there is going to be undercover or even blatant marketing here but not on the scale social media enables. Plus, there is a higher chance of getting an answer from a real person!
- Social media. Admittedly, finding crypto presales to invest in and vetting them with other crypto enthusiasts can be done on X or Facebook, too. It is just that even heavily moderated groups or reputable accounts are not 100% safe from bots, spam, or shilling. Social media is a valid source of information about new crypto presales but due to the necessary caution, it is lower than the other two methods.
- Crypto news websites. Most of the announcements for upcoming presales come from the teams in press releases. It can be a great source for keeping a hand on the pulse in the presale crypto market but remember that not all information in those is independently checked. Crypto YouTube would fall into the same category.
Conclusion
Getting early access to promising crypto projects sounds exciting and enticing, we get that! Just remember that no matter how hard they try to cause FOMO with you, you have to review the project and not invest more than you can afford to lose.
Read more news and guides by the ChangeHero team in our blog! If you want to get updates, follow ChangeHero on social media: X, Facebook, Reddit, and Telegram.
Frequently Asked Questions
What is the best crypto to buy in Presale?
The best crypto presales to invest your money into have to be picked with your own circumstances in mind. Start with new crypto projects with verified teams and solid but reasonable tokenomics.
Where can I buy pre-launch crypto?
Centralized and decentralized crypto exchanges often hold presale events that reward early investors. If you want to get in even earlier, look for launchpads and ICO aggregators.
The riskiest but potentially most rewarding stage to get into a crypto project is in its early fundraising stages which are held outside of a third-party presale platform.
Is it good to buy presale crypto?
Crypto presale coins have the potential to massively gain value after the project takes off. At the same time, it is worth remembering that even the safest investment can still end up in a loss, and much more so high-risk investing in even the best crypto presales.
How to buy pre-sale?
You can find information about new crypto presales on dedicated resources, social media, and crypto news. The purchase methods that crypto presales use range from popular cryptocurrencies to stablecoins and bank cards.
Disclaimer
This article is not a piece of financial advice. When dealing with cryptocurrencies, remember that they are extremely volatile and thus, a high-risk investment.
Always make sure to stay informed and be aware of those risks. Consider investing in cryptocurrencies only after careful consideration and analysis and at your own risk.
