From Nasdaq:

Summary:
Initial Coin Offerings (ICO) are used by startups to raise capital through selling digital tokens or cryptocurrencies. However, there are significant differences between ICOs and IPOs, including regulatory frameworks and the nature of projects involved. Despite the risks and fraud concerns associated with ICOs, they offer a wider investment audience and democratize fundraising.

Pros and Cons of ICOs:
While ICOs democratize fundraising, they also come with high volatility and risk. Investors are at risk of losing their entire investment due to fluctuations in token value and the lack of regulatory oversight. Thorough research and caution are necessary before investing in an ICO to avoid fraud and scams.

Investor Considerations:
Before getting involved with ICOs, investors should carefully examine the project’s whitepaper, tokenomics, team, product-market fit, and distribution mechanisms. It’s important to evaluate the team behind the startup, their communication with the community, and their partnerships. Additionally, understanding token distribution and market cap is crucial to minimize risk.

What to Watch Out For:
Investors considering an ICO should pay attention to token distribution, team reputation, social media presence, partnerships, and market cap of the project. While lower token prices may seem enticing, considering the project’s market cap and concentration of token holders is essential for making informed investment decisions.



Read more: What Is an Initial Coin Offering? Here’s What Crypto Investors Need To Know