The following article was written by Adinah Brown, content manager at Leverate.
In the 1970s and 80s, Eurobonds was the focus of discussion for wily investors jumping on the latest financial bandwagon. Today, it’s cryptocurrencies. Any investor worth their salt cannot failed to pick up on the buzz surrounding this new technology and the rush to raise finance using Bitcoin, Ethereum, and dozens of other newly-minted crypto-coin offerings.
Barely a decade old, the cryptocurrency market is awash with entrepreneurs eager to raise funds on this exchange. The idea of launching actual electronic currencies on the cryptocurrency exchange has proved to be just so appealing that investors and fundraisers alike are tripping over one another to raise funds and invest in a market that literally contains no supervisory authorities. Essentially, the financial big boys of old – the Central Banks have been sidelined by this new phenomenon. Add to this the fact that each of these new transactions can be concluded in seconds without the normal interminable need to wait up to five business days for funds to clear, then the appeal of this new market is blatantly clear.
With something like 800 individual cryptocurrencies currently on the market, these new financial instruments are impossible to ignore. The technology, while intense in its use of computing power to generate and maintain the algorithms that keep the Blockchain buzzing, is also simple in its fundamental design. Have a funding requirement, but don’t want to kowtow to a venture capitalist to run the deal, or the Central Banks who will trip you up with regulations? No problem! – just turn to the cryptocurrency market – launch a new currency with a flexible transfer policy into other mature cryptocurrencies like Bitcoin and Ethereum, as well as fiat currencies such as the US Dollar or Euro – and you’re set! Let the Blockchain, or online ledger take care of the transaction security, then just sit by and watch the funds roll in.
These cryptocurrency fund-raising launches, or ICOs (Initial Coin Offerings), attract investors who believe in the underlying start-up product being marketed. If the product takes off, then the investor is set to make a killing as the cryptocurrencies appreciate at a dramatic rate.
However, there is also a danger with this new funding mania.
Launches can stumble, and investors can potentially lose a significant portion of their investments. To offset these risks, cryptocurrency launchers are required to publish clear details about the products being launched via technical and marketing white papers. Social media is also an ideal method for publishing what is going on in both the start-up product area as well as with the cryptocurrency market itself. Blogs, presentations, video marketing, and slide sharing are the tools used to get the message out.
Further measures to ensure the success of a cryptocurrency launch include complying rigidly with the regulations that do exist around the technology. Abiding by the rules of CySEC, MiFID, the FCA, and the FSA are paramount.
In summary, fund launchers must be honest, transparent, and legal to attract investors and to make their fundraising a success.