Everything You Need to Know About Participating in IDOs and IDO Projects Investments Risks
What would you give to go back to 2009 and convince your old self to buy a few Bitcoins? No one could have estimated that, 13 years later, this crypto coin, once worth just above zero, would have its value increased to around $60,000. Now, we can only avoid making the same mistake and learn everything possible about the current trends in the crypto world.
One of the crypto-based investment sensations right now is IDOs. This new token offering modality debuted in 2019 when Raven Protocol listed its IDO on Binance DEX. But it was only in 2021 that IDOs gained massive popularity, with the consolidation of decentralized finance and the arrival of several decentralized launchpads.
There is still time to become an early investor in IDOs. To help you in this new venture, we have prepared an in-depth guide to show you all the details about joining an IDO deal. Check it out!
What Is IDO?
Initial DEX Offerings or IDOs refer to a fundraising deal for a crypto-based project through decentralized cryptocurrency trading platforms. Unlike other crowdfunding models, the founders have the power to determine the value of their project, and anyone can take part in an IDO, even a novice investor.
In an IDO, the tokens are listed directly on a decentralized exchange (DEX) which lowers the listing costs compared to other token offerings. IDOs tend to sell out quickly, allowing a project to be developed soon after its deal launch, and the investors can sell and trade their tokens immediately. If you are beginner read here about IDO meaning.
In essence, any blockchain-based project can launch an IDO. The majority of the projects center around DeFi, metaverse, NFTs, and gaming. Get to know some popular deals available right now:
- Plutonians: a metaverse space strategy game that blends strategy RPG, action shooter, multiplayer PvE, and social games in an alternate reality.
- BattleVerse: a free P2E online game where users can earn money by playing and developing along with the Universe.
- MetagamZ: a metaverse where game creators can build and launch games with Defi features.
How to Participate in an IDO?
Every IDO launchpad will have specific steps and requirements for an investor to join an IDO deal. Here you’ll learn the basics using BullPerks as an example.
There are some tasks an investor must complete before joining a deal, including buying tokens and staking them.
- Set up your MetaMask wallet.
- After logging in or creating an account, you must go to Settings > Networks and the BNB Chain. When you create an account in MetaMask, only the Ethereum network is available from the get-go, you need to add the BNB Chain manually. The instructions on how to do that can be found in this article.
- Then, click on Add Token and copy the token address info to create a space for BLP tokens in your wallet.
You can find BNB Chain network connection info here.
- Purchase BLP tokens on PancakeSwap DEX.
- You must select a crypto pair and confirm the swap. Add the contract address to add BLP as an option.
- After the transaction, PancakeSwap will offer you to view your transaction and add BLP to MetaMask. Then, you will be able to check your purchase in your wallet.
- Register on BullStarter and complete the Know Your Customer procedure.
- To ensure the safety of every deal, BullStarter requires that every user completes a KYC process. After your registration, the system will guide you to complete the KYC, and it takes less than 3 minutes!
- Lock your tokens.
Locking or staking the tokens is a means of being eligible to participate in our deals.
- To do so, you must know how many tokens you need to lock for a specific deal. Then, go to the Account menu, click on Lock-in, select the number of tokens and click on Lock. Confirm the transaction on MetaMask.
This step will determine your tier, which will later influence your profits.
Joining a pool
After the preparation steps, you choose a project and participate in an IDO deal.
- Choose a deal.
- On the Deals menu, you can check all the available projects.
- It is essential to learn more about the deals before joining them, and you can do so by reading the articles published on BullPerks’ Medium, where each initiative is described in detail.
- Join the deal.
- After choosing the deal and learning everything about it, you can click on Join Deal.
- To invest BUSD in the deal, you need to approve your MetaMask wallet by pasting its main account address on the Target Network line. Click on Approve, confirm the transaction, then click on Pay.
Congrats! You joined the deal.
How to Earn Money From IDO?
Investors can get their tokens after they are listed on a decentralized exchange.
Either way, the investor will be receiving returns on their investments, but it is wise to analyze the token performance after listing and then decide which earning method they’ll choose.
After the vesting period, you have access to token distribution according to your tier allocation.
- Open the deal’s details on your Portfolio. You can check all the information about the deal on the Portfolio and click o Claim your vested tokens to redeem your earnings.
- After confirming the transaction in your wallet of choice, you will see the confirmation of the transaction submission with the tokens appearing in your wallet shortly after.
Diving deep into the world of crypto investing can be a huge success or failure if the investors aren’t aware of the associated risks. Learn more about IDO investment risks and how to avoid them.
IDOs are becoming an all-time favorite among crypto investors for their transparent investing process and extensive portfolio of promising projects. In fact, this new investment modality is so popular that the best IDO fundraising performance of 2021 reached 127 times its token price.
However, every investment has its risks, so IDO does as well. In this article, we’ll address the most significant risks of investing in IDOs and help you decide whether or not it is worth the try.
What Is IDO?
Short for Initial Dex Offering, IDO refers to crowdfunding, an early-stage cryptocurrency-based initiative completed through a decentralized exchange platform.
While sometimes understood as the evolution of other coin offerings, IDOs are a new type of fundraising that extinguishes intermediaries between the projects and the investor. In this modality, startups set up their fundraising on launchpads while the DEX takes care of the token listing.
The process is simple: after the IDO is launched, the launchpad will offer a pool where investors can buy tokens and receive them after it reaches its financing goal and the Token Generation Event happens. The TGE usually occurs within a few hours after the IDO’s conclusion, and the token is immediately listed on the DEX so investors can trade it.
The primary motivator behind the IDO’s popularity is the flexibility for startups to launch their deals and for any investor to participate in it. It is a great opportunity for anyone who wants to get started in crypto.
How to Analyze IDO Projects
Like every high-risk investment, crypto-based projects have their own failure rate in the long term, as some initiatives cannot sustain their popularity. While IDOs have shown to be fairly safer than their precedent coin offerings, every investor must still research each project before buying its tokens.
A promising project will have a reliable team behind it. Usually, many project team members won’t have much experience in the crypto industry, but their previous jobs and track can give clues on how they will deliver a project. On the other hand, the advisors also play a massive part in the project’s success and must be a group of academics, entrepreneurs, or executives that can guide the startup.
Another staff-related variable to consider is the developers. As high-end blockchain developers are still lacking, a project that bears a dedicated developer is more likely to thrive.
Having an engaged and positive community is also a green flag. The activity level on different social media can indicate its community’s adoption and use of the project. A great example of the community’s influence on project success is Dogecoin, a memecoin that continues to grow in value every day.
Looking into the project’s team profile and community activity is a good strategy to start your due diligence.
Top Investments Risks on IDO
Before investing in IDO, you must understand the most common associated risks to make wise choices to invest your money. Here is what you should know:
Lack of control: Liquidity exchanges weren’t built specifically to make IDOs work. As a result, project founders have less control over the fundraising. This lack of control can lead to some issues, such as the fluctuation of the token price after the first trade.
Unfair prices: Due to the price fluctuation, only a few early investors are able to purchase a token at the listed price. Thus, those traders might take advantage of the shifting prices to buy tokens in bulk or even develop trading bots to resell the tokens at an exorbitant price.
Liquidity scams: To participate in an IDO, investors must act quickly, which often leads to poor decisions. Scammers take advantage of that by listing phony tokens that seem legitimate. As soon as they gain some liquidity, they withdraw ETH from the liquidity pool and leave investors with fake tokens.
Decrease in value: Like any other crypto-based investment, IDO tokens are susceptible to a decline in value after their listing. That can happen for many reasons, from the project’s diminished popularity to some external event affecting the tokenomics. Investors must watch the token movement to figure out the right time to trade.
Why can projects be refunded?
Because scammers are constantly evolving their means to deceive investors and launchpads, sometimes they manage to keep the act up until they are listed.
In those cases, if the launchpad later acknowledges the scam or if the project doesn’t reach the minimum raise, the platform can offer a refund to all the investors. That way, the community suffers minor damage from the scam.
However, refunds are exceptional cases. You won’t be refunded when you buy a token and regret it later. So, do your research and be sure of your decision before investing!
Is it possible to lose all your money?
If the project you invested in is a scam, fails due to poor execution and performance, or the token simply decreases in popularity and value, you can lose some money.
How IDO Works on BullPerks
BullPerks cares deeply about its community security, both financially and data-wise. While the risk can’t be liquidated entirely on any platform, BullPerks reduces the failure rate by conducting its own due diligence, researching each project over.
The company checks the viability of the projects and its founders’ track record and dives deep into technicalities such as verifying compliance with the industry’s regulations, development roadmap, tokenomics, and more. We dug every detail about the initiative, so our platform is filled with legitimate promising projects.
In crypto, opportunities are coming at us fast, and we must act quickly not to lose a potential deal. However, like any other type of investment, it has its risks, and every investor must study their prospective projects before investing.
While IDOs are still high-risk investments, their profitable returns and security guaranteed by the blockchain can make the risk worth it.
Disclaimer. This material should not be construed as a basis for making investment decisions or as a recommendation to participate in investment transactions. Trading digital assets may involve significant risks and can result in the loss of invested capital. Therefore, you must ensure that you fully understand the risk involved, consider your level of experience, investment objectives, and seek independent financial advice if necessary.