Pros and Cons of Investing in IEOs

The ICO frenzy had been one of the biggest bubbles in history and it eventually came crashing down. A lot of things had changed in the crypto industry during the past two years and as we’ve seen recently, not even cryptocurrency mining is as it was before. Thankfully, the wind of change brought new opportunities and one of them is represented by the appearance of Initial Exchange Offerings (IEOs).

Even though IEOs could provide opportunities to invest in blockchain-based startups with high potential, the reality is that it gets increasingly difficult to find such companies. We would like to talk about some of the pros and cons of IEOs, so you’ll be able to make better decisions.

When IEOs = Opportunity

IEOs are very similar to ICOs, but in this case, we’re talking about projects backed by exchange platforms. The positive side has to do with an extra layer of verification, since no exchange would like to feature scam projects and lose clients, as a result. Depending on the exchange, listing conditions are more or less hard, but having the exchange at your back, could mean you won’t need to do as much research as with ICOs.

At the same time, all transactions are done through the exchange, so you don’t have to worry your money won’t reach where they should. By putting these aspects together, we can say that IEOs look to be more reliable and secure, but that doesn’t mean there are no downsides involved.

The negative side of IEOs

Does it mean that simply because a project is backed by an exchange platform it will automatically be successful? The numbers speak for themselves and only a few IEOs turn out to be great investments for people who financed them. Same like ICOs, when you decide to invest in a project, you are not investing in the final result, but in a plan that might or might not work out.

If we add that the company behind the IEO must come out with a compelling story in order to attract more people, we end up with a project that will very likely fail to deliver on most of its promises. This has plenty of negative consequences, because failure to implement the white paper, means the token won’t have fundamental reasons to rise in value.

The bottom line is that even though an exchange platform can prevent a scam from raising money from people, the hard work falls on your shoulders and it will be up to you to create a rules-based methodology that will help you find those companies that will deliver on their promises.