Crypto presales let you buy new crypto at a much lower price than currencies like Bitcoin or Ethereum. Getting in on the ground floor doesn't come without its challenges, though.

A cryptocurrency presale is the opportunity to buy crypto tokens or coins before they are released into circulation. There are two types of cryptocurrency presales.

The first is an investor-only token sale, offered exclusively to big investors who want to put their money into a new cryptocurrency venture early on. These can be expensive, but they also provide investors exclusive benefits, like discounts or access to bonuses not offered in regular token sales.

The second kind of presale is open for everyone, and it’s what allows retail buyers to purchase a token before it goes public. A majority of tokens are sold during a public sale.

Why should crypto investors know about cryptocurrency presales?

One of the biggest reasons crypto investors know about presales is that presale tokens can increase in value exponentially after going live on a cryptocurrency exchange. Cryptocurrencies have been around since 2009, and many people who bought into Bitcoin at its presale stage (and held onto it over the last decade) are now millionaires.

Read more: How To Invest In Cryptocurrency: A Beginner’s Guide

What are the risks involved in cryptocurrency presales?

One of the risks involved for investors in cryptocurrency presales is that you are investing in something new and unproven. Dozens of new cryptocurrencies come on the market every month, but most will never be widely adopted. That means they may, eventually, lose all of their value.

Furthermore, except for established cryptocurrencies like Bitcoin and Ether, most cryptocurrencies are not accepted by businesses, so there’s no guarantee you’ll be able to exchange them for other currencies or goods and services.

Cryptocurrencies are also volatile – meaning that their value can go up or down very quickly. You might buy crypto during a presale, see the value pop before falling to a price that’s less than what you paid for it.

Since cryptocurrencies are traded on unregulated platforms, they don’t offer protections like those afforded by brokers or centralized exchanges.

Advantages of buying in presale stage

The primary benefit for investors buying a new cryptocurrency at the presale stage is investing in that currency at a lower price. It can also help you secure a stake in that currency’s total supply, meaning that if demand increases and more users begin using it, your holdings will be worth more.

Keep in mind that there are some risks associated with presale-stage investing, though. If something goes wrong with a presale campaign—an announcement gets delayed or doesn’t happen as planned—you could lose all your money. However, getting in at the presale stage assures a profit – sometimes massive gains – when the coin gets listed on a popular exchange such as Binance, Huobi, or Coinbase.

Historically, cryptocurrencies such as Ethereum, Ripple, and Cryptonite could have been bought at the presale stage for $0.001 per coin during the ICO phase and later increased to $2.50 or more within two months of their launch on an exchange.

Read more: STOs Vs. ICOs: Everything You Need To Know About Crypto Fundraising

Crypto wallets you must have

Wallets are an essential element in cryptocurrency. They are where you store your digital currency.

Investors must choose a wallet that meets their needs and fits their lifestyle. There are three main types of wallets available for storing cryptocurrencies: desktop, mobile, and online/hardware.

Each type of wallet has its benefits, but they also have drawbacks depending on how they are used. One of the most important things is deciding whether you want a software or hardware wallet because each one has different pros and cons that can potentially affect how securely your coins are stored.

An example of a software wallet is Exodus, which supports multiple cryptocurrencies, including ETH, BTC, and DASH. In contrast, Ledger Nano S supports over 30 cryptocurrencies, including DASH, BTC, ZCash, etc.

For trading purposes, a simple wallet like Metamask will do but make sure to keep your coins in a safer – preferably hardware – wallet.

Read more: 6 Best Crypto Wallets To Stash Your Bitcoin

How to participate safely in a cryptocurrency presale

Today, thousands of start-ups use an initial coin offering (ICO) to raise money for their projects. An ICO is a type of crowdfunding used by companies looking to launch a new cryptocurrency or blockchain platform.

It allows start-ups to collect funding from individuals worldwide by issuing tokens in exchange for cryptocurrencies like Bitcoin and Ethereum or other forms of legal tender.

However, participating in ICOs can be a risky business, so investors must fully understand how they work before they buy into one. As with any other kind of investment, there are risks involved in participating in an ICO.

Understanding cryptocurrency exchanges

Even if you’re not planning on participating in a presale, it’s helpful to understand how cryptocurrency exchanges work. Exchanges are platforms that allow users to buy and sell crypto coins like Bitcoin.

The difference between Coinbase and Shapeshift is that once an order has been placed at an exchange, they facilitate the trade of cryptocurrencies from one user to another.

In essence, they serve as middlemen who don’t have any control over prices you must. However, and collect fees from users on each transaction.

Some exchanges will allow traders to lock their transactions for a certain amount of time before completing a purchase or sale, which gives them more time to decide whether or not a coin is worth buying or selling at a given moment.

Finding crypto presales at the right time

Due to overwhelming demand, cryptocurrency presales are closed or sold out within minutes of opening. That means you need to be on your toes when it comes time for a new presale.

The first step is learning about upcoming token sales and cryptocurrencies that are ready for release. A simple Google search should give you all of the information you need. However, community forums are also a great place to learn more and connect with people who can share valuable advice about past presales and possible future ones.

Time matters: many will tell you that timing is everything when making money from presales – and they’re right! Knowing how long a sale will last and what time it’ll open can mean the difference between making money or losing out entirely.

Managing your expectations

As an early investor in a cryptocurrency, you will be subject to hype and volatility. You must manage your expectations about how much money you’ll earn from any given presale.

To do so, it’s helpful if you have a sense of what kind of profit potential exists in any particular coin or token.

In other words, if you want crypto as part of your portfolio for diversification purposes, take a realistic approach when looking at presales as potential investments. Because they are sales instead of investments, you don’t have many ways to exit an investment if something goes wrong down the road.

That means you must focus on choosing coins and tokens with reasonable expectations around value growth and stabilization after they launch.

What role does the development team play?

Typically, token and blockchain entrepreneurs will release a “white paper” containing the details of their project and will also host a presale to generate interest in their brand. The development team can be thought of as the management group that decides how to use funds raised during the presale.

Only time will tell whether any given cryptocurrency or token proves profitable for its early supporters, but there are some warning signs that you should look out for:

  • If the developers don’t seem transparent about what they plan to do with investor funds.
  • If they create an idea and/or company without consultation from outside experts.
  • If there is no roadmap for how projects will get completed.
  • Unverified claims by developers about how their token will grow in value and deliver profits.

The best way to make money from a presale: cryptocurrency presales can be very profitable if presale tokens hit the market later on at a much higher price, but there is no guaranteed way of making money. You should only invest what you are willing to lose entirely.

As with any investment, you should never invest a large amount of money that you can’t afford to lose. Cryptocurrency markets are extremely volatile and, therefore, not appropriate for investors who have limited capital reserves. If your portfolio is limited, it’s best if you stick with more reliable investments outside of the digital currency market until you build up a bigger safety net.

Is a price surge inevitable?

In the internet age, hype starts building from day one for some start-ups, while “bigger” companies focus more on a long runway.

Nobody knows precisely when a cryptocurrency presale will lose momentum and investment flow. It’s not an easy question to answer because the height of any initial coin offering is unpredictable.

If you want to participate in a presale with some degree of safety, look for investments with lower risk and higher reliability, such as stable coins or platforms that allow users to spend their tokens at certain vendors right away. Cryptocurrency investing is about constant monitoring and reassessing what is most profitable at any given moment based on what action needs to be taken next.

Some traders keep close tabs on how coins perform to get a sense of the market sentiment surrounding new token sales.

By monitoring both new and established cryptocurrencies, you can figure out which coins or tokens have an opportunity to perform well on the open market in the short term. Cryptocurrency trading isn’t just about success. It’s about managing risk properly for future success.

Can you get bonus tokens?

Yes, presale investors often get bonuses for the coin or token they bought at a lower price.

When purchasing ICO tokens during the cryptocurrency presale, you will often be allowed to receive bonus tokens for using funds when interest rates are likely higher than if you were only participating in the crowd sale. Cryptocurrency presales also typically come with very low minimum purchase amounts due to high demand – this is why timing matters when you invest in an ICO presale. You should do your research before deciding about investing money in cryptocurrency because it’s not without risk.

Does the blockchain verify purchases?

Cryptocurrency presale transactions are verified by the blockchain immediately.

Blockchain technology enables the blockchain – a distributed database that allows for a secure, transparent, and tamper-proof way of recording transactions. It’s this technology that makes cryptocurrencies like Bitcoin possible.

The blockchain can be used to track anything of value, not just cryptocurrency. This could include items like real estate or diamonds.

The blockchain is also a public ledger, meaning that anyone can see the transactions that have taken place on it. So, blockchain technology provides a secure way of doing business.

FAQs

What is a smart contract?

A smart contract is a code that governs transferring of coins or tokens on the blockchain. It can define what happens with particular coins or tokens by specifying conditions around them. A smart contract ensures that rules are followed when these predefined conditions are met and payments are executed automatically.

What is a utility token?

A utility token is a type of coin or token with an inherent use case, like Filecoin. The tokens are not designed to increase in value. Instead, they are used to accessorize paid services on a decentralized peer-to-peer network. These services include IoT data storage and transmission capacities that big companies would otherwise be difficult to offer efficiently without centralization.

What does “pre-ICO” mean?

“Pre ICO” is another way of referring to a crypto presale. A presale is a crowdfunding event that takes place before the completion of the project in preparation for an ICO or Initial Coin Offering. This way, it can lay its groundwork and reach out to investors to prepare for the big day when everything is public and tradeable. Historically, blockchain projects have raised an average of $12 million through presale events.

Who determines the total supply in a crypto presale?

The cryptocurrency development team determines the total supply in a new cryptocurrency presale. The number of tokens or coins available at any given time and in the future is determined by the total supply preset during the presale, which can be achieved in two ways:

1) setting a fixed-number; or 2) using a decimal to denote scarcity (e.g., 1atx = 1, but .5atx = very rare). The average number of crypto presales that have used this latter method is usually quite low, with .13 being an accepted norm for workable digital assets.

Summary

Cryptocurrency presales can be lucrative. The good news is, it doesn’t take much in terms of knowledge or experience to get in on these types of deals. Follow these simple steps above, learn as much as you can about emerging tokens, and be well on your way. Finally, as with any speculative investment, don’t invest more in a crypto presale than you can comfortably afford to lose.

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Chris Muller picture
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Chris has an MBA with a focus in advanced investments and has been writing about all things personal finance since 2015. He’s also built and run a digital marketing agency, focusing on content marketing, copywriting, and SEO, since 2016. You can connect with Chris on Twitter.