There has been a noticeable recovery in the blockchain and cryptocurrency world for several months. Investors once again can significantly increase their funds; crypto projects raise millions in seconds. IEO cause this all. Let's find out how to make money on this new trend.
What is IEO
Initial Exchange Offering (IEO) is similar to ICO but with a slight difference because token sale takes place on a cryptocurrency exchange. Investors do not need to send cryptocurrency to the project’s smart contract as during the ICO. It is enough just to make a deposit on the cryptocurrency exchange and press “buy tokens” button at the appointed time. Purchased tokens will appear in your exchange wallet, and you will be able to trade them very soon comparing to the average ICO tokens.
Difference between IEO and ICO
A crypto market newcomer may think that there is no difference whether to buy tokens through the exchange or through a smart contract, but this is not true. Let’s discuss the main differences between IEO and ICO:
Security for a retail investor
A huge number of scammers accompany each ICO. They write scam addresses of smart contracts privately to investors, as well as pretending to be members of the ICO project team, they hack official social media and lure money from investors through them. In IEO, the scammers have no chance, because the investor just needs to enter his cryptocurrency exchange wallet and click the "buy tokens" button.
Convenience for the IEO project team
The process of ICO implementation is very complicated. It requires information and marketing cooperation with a large number of investors for a long time. In the case of IEO, the exchange removes most of such workload from the IEO team, allowing them to focus on product development.
Investment benefits from IEO participation for a retail investor
The listing issue is one of the main ICO investors’ concerns. Because exchange name and listing time determine the future price of the token in many cases. When conducting an ICO, projects due to legal reasons never tell specific dates for listings and names of the exchanges where they going to be listed.
Investors of many ICO projects hoped for a quick listing, but they are still without tokens for more than six months and unable to return or reinvest the invested funds.
During IEO, information about the listing is also covert for the same reasons, but all investors understand that the listing will be on the exchange that holds IEO, and most likely it will be listed in the near future. For example, for all IEO projects from Binance Launchpad, which is the leader of the IEO industry, token listings started within a week after the token sales.
The cryptocurrency exchange is engaged in quality control of the IEO project
The reputation and financial well-being of the cryptocurrency exchange depends on how well the IEO project will show itself after the listing. Therefore, the exchange itself is engaged in checking the project’s quality and how truthfully IEO team gives information about partnerships and team members’ background. For example, on the Bittrex exchange, RAID IEO should have happened. But when it became known that RAID presented incorrect information about their partnerships, Bittrex canceled IEO, fearing for the reputation.
It is beneficial for the cryptocurrency exchange to maintain the token price of its IEO project
ICO investors know that often after the ICO many projects stop marketing and do not maintain the token price. After all, they already have money for product development, and the token price is not so important for the ICO team. In the case of IEO, it is profitable for the cryptocurrency exchanges to engage in supporting the token price because their next IEO projects could collect more money and get more investors.
Cryptocurrency exchanges for IEO
Binance started IEO golden fever by launching a very profitable project BitTorrent (BTT). IEO BitTorrent investors could increase their investments ten times in just a week. And this is despite the bear market at that time. Many cryptocurrency exchanges began to work in the IEO field, and after the second successful IEO Fetch (FET) on the Binance Launchpad, about ten other exchanges announced officially their upcoming IEOs.
Bitmax exchange held a successful IEO DOS, during which investors could get up x6 gains. But Bitmax applied additional measures to keep the DOS token price high: firstly, they made a very small initial circulating supply, and secondly, half of the purchased tokens were locked for 3 months.
The IEO TOP Network just passed successfully on the Huobi Global exchange. And we expect MultiVAC IEO on the KuCoin exchange in the near future. We are also waiting for the announcement of IEO on the Okex exchange and for VeriBlock IEO on the Bittrex exchange.
When conducting IEO, a low initial circulating supply is usually established to create a great demand for tokens. Therefore, the question arises for the potential investors on how to buy tokens while they have not yet sold out.
There are various approaches to conduct an IEO sale. Let’s consider the main ones:
- FCFS (First-Come, First-Served). People who manage to press the "buy" button and to enter the required data (like captcha or some confirmation code) faster receive tokens.
- Lottery. The rights to purchase tokens are randomly distributed among those who sent an application for participation.
- Stacking. The priority rights to purchase are for those users who hold the native tokens of the cryptocurrency exchange which conducts this IEO.
- Trading. Purchase model in the form of exchange orders was applied by Huobi Global exchange.
The most popular approach is FCFS for today, but, firstly, it is more profitable for exchanges to have a constant rather than one-time demand for their native tokens, and secondly, in this model, exchanges need to deal with users who use scripts for a quick purchase. In our opinion, most exchanges will come to a model using stacking. Binance and Huobi Global have plans to perform next IEO this way.
Which IEO are good investments
Here are brief tips from our experts on how to choose IEO to invest:
- IEO should take place on a large exchange with a proven reputation. Such an exchange will take care of its IEO.
- If it is FCFS token sale model on a popular exchange, your chances to get tokens are about 5-15%. There are a lot of people who bought the exchange’s native tokens only to take part in this IEO. And when they fail most of these tokens will be sold and dump native token price.
- You should always analyze the initial circulating supply. It should be low, not more than 7-8 million in USD evaluation.
- There are should be no participants with big bonuses or free tokens. For example, in VeriBlock IEO 70,000,000 VBK tokens will be sold, but miners already have 56, 000,000 unlocked VBK. Experts have information that miners sold VBK in recent month at price about 0.3 from IEO price. It would be hard for Bittrex to maintain VBK price even if they want to.
IEO is gaining popularity rapidly. This IEO rally can be stopped by an overall serious fall of the cryptocurrency market because people will not put their money at risk due to bearish sentiment and projects will collect much less money.
Also, the staking requirement by the cryptocurrency exchanges is likely to gain momentum. But be careful with purchasing a cryptocurrency exchanges tokens because their price has been already increased by several times. The growth of the IEO industry is definitely worth watching. This new IEO wave can help projects to raise money for development and gives an opportunity for investors to significantly increase their funds.