If you’ve just entered the crypto scene you might have heard people talking about events called IDOs. But what exactly is an IDO?
An Initial Decentralized Exchange Offering (IDO) in crypto is when a company releases a cryptocurrency token on decentralized liquidity exchange. Decentralized exchanges are markets where one can buy and trade crypto peer to peer without an intermediary. This means, you don’t face the transaction fees or rules you find on centralized exchanges like Kraken and Coinbase. An initial coin listing on a centralized exchange is called an ICO.
If you’ve heard of IPOs (initial public offerings) in traditional finance and investing, IDOs are like the IPOs of crypto. IDOs are often great opportunities to invest in projects at a great price. However, there are risks to be aware of when investing in an initial decentralized exchange offering.
IDO scammers everywhere
Unfortunately, cryptocurrency, like many fields, is one where all kinds of opportunists are abound. Some of these are straight up scammers. One way people easily scam others on IDOs is by publishing fake contract addresses. A contract address is an address location of the actual token contract that manages the logic for the tokens.
In general, for every new cryptocurrency that gets listed in an IDO, there will be three to four fake cryptocurrencies that will list under the same name. Therefore, it is extremely important to double and triple check the contract addresses.
However, there are ways around these greedy people. For example, you can go visit their Twitter page and check if any influencers are following the cryptocurrency you want to buy. Make sure it is the correct Twitter page. Quite often you can get the contract address from there. Furthermore, many companies have Telegram channels where they will release this information.
However, always be aware of fake Twitter accounts and Telegram channels. Double check to make sure it is the real one. If you’re new to the scene, it is best check the contract address on both, Twitter and Telegram. They should be the same. If not, you’ve got a fake contract address.
Bots send prices high in minutes
On some IDO launches, bots will send prices as high as 100x just minutes after launch. So, it’s very easy to get destroyed on IDO launches if you don’t know what you’re doing. What usually happens is that bots will buy up at the initial IDO price, and then they’ll dump it as soon as they’ve made a 100x. This sends the price back down as high as 80 or 90%.
If there are bots on a launch, you will want to wait 30 minutes or so until they’re done dumping. In the picture below, you’ll see the price of this IDO from today, Standard, went up to $3.00 and then dumped nearly 100% a few minutes later, offering a potential good entry. Of course this is different with every IDO, but keep an eye out for huge price surges right at the beginning of an IDO.
This is the first part of a two-part series explaining IDOs (Initial Decentralized Exchange Offering). We will discuss more about investing in IDOs and strategies to have to make quick gains but also minimize risks in a follow-up article very soon.
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Please do your own research before investing in cryptocurrency. This article is not financial advice. Please be aware of the risks of purchasing cryptocurrency, especially on IDOs.
Aaron is passionate about blockchain and has been an investor in cryptocurrencies for the past years. He enjoys engaging with other people in the cryptocurrency community online, particularly on Telegram, and learning from experts.