IDOs are probably no longer unfamiliar in the crypto market because of the profits they bring to participants. But is participating in an IDO a surefire way to win 100% of the time? In this article, we will explore what an IDO is and the reasons why they have become so popular
What is an IDO?
An IDO (Initial DEX Offering) is a fundraising method that involves the initial offering of tokens on decentralized AMM (Automated Market Maker) platforms. IDOs typically have two pools: one for the community and another for users holding platform tokens (like POLS or DAO).
The currencies used in IDOs are quite diverse, including USDT, USDC, and ETH.
Evaluating the Advantages and Disadvantages of IDOs
Advantages
- New projects can raise capital more easily than through IEOs on centralized exchanges (CEXs).
- IDOs have evolved into many other fundraising methods, including the very successful IFO (Initial Farm Offering) on PancakeSwap.
Disadvantages
- As with other trends, there has been a proliferation of scam projects designed for pump and dump schemes.
- Activities such as IDO registration or subsequent buying and selling (mostly listed on DEXs) are dependent on gas fees (especially on Ethereum).
Why Have IDOs Become So Popular?
For a project to develop, connecting with the community is a must. So how do IDOs help in this process?
Back in 2017-2018, tokens were distributed to users through ICOs and IEOs, where users could buy tokens at low prices. Users lucky enough to buy tokens always waited for a pump when listed on exchanges, hoping for a profit of 5x to 10x. However, achieving such a level of profit requires a huge amount of money to be poured in.
For example, the Konomi IDO had an initial market cap of $200,000. To double that, an injection of $200,000 is needed. Similarly, for 4x it would be $800,000, and for 10x it would be $2,000,000. However, with the development of current AMMs, pushing the price up doesn’t require that much money anymore.
This is a very effective marketing method because the project will be mentioned repeatedly with extremely high ROI figures and attract community attention (or potentially extreme negativity). In addition, the project can measure its “hotness” by seeing if the ROI meets expectations.
Besides, the project doesn’t need to pay listing fees to CEXs, which can be quite expensive. With Uniswap and Sushiswap, projects can list tokens easily and for free.
Therefore, with IDOs, both the project and the users get the benefits they want.
Learn more: Popular crypto fundraising launchpad models
Popular IDO Platforms
In early 2021, when these platforms were just becoming known to users, there were only a few projects, such as Polkastarter and DAO Maker.
But as of April 2021, there are no fewer than 20 projects working on IDO platforms, as shown in the image below
These projects almost all look the same, with no significant differences. Many were even established right around the May 19th market correction, and 3-4 months later still haven’t launched a single IDO.
See more: Top 7 notable Launchpad platforms.
Factors Affecting Token Prices During IDOs
Alongside participating in Whitelists, it’s quite common to buy platform tokens with incentives: Locking tokens to participate in pools specifically for token holders.
However, the question here is: What’s the right way to invest in IDOs?
The image above shows a few fundraising platforms and the ATH ROI of their project tokens. By locking tokens to gain access to pools reserved for token holders, these tokens have seen a relatively good increase in ROI.
Being a pioneer, as well as having about 70 IDO projects at the time of writing:
- POLS has an ROI of 15x from its Public Sale price.
- Falconswap, although solving the problem of high transaction fees and slow transaction speeds, with only 3 IDOs, FSW does not have the same level of growth as other platforms.
- DAO Maker and Poolz currently have 16 SHOs and 8 IDOs respectively, with the highest returns being 8.5x and 6x respectively.
Therefore, it seems that the price of a project token does not depend on the outstanding features of the platform, but is affected by the incentive to lock tokens to participate in the Special Pool and the number of IDO projects.
Is an IDO a Guaranteed Win?
According to the ROI statistics of the projects, almost everyone who bought at the Public Sale price made a profit, whether it was small or large. Coupled with the fact that the platform token also increases in price as mentioned above, many people think that IDO is a “money distribution” deal for everyone. But is that really the case?
If you have never participated in an IDO, you won’t know that there must be a Whitelist round to select the LUCKY ones who have the opportunity to buy tokens at the Public Sale price. It is very difficult to give the Whitelist winning rate, however, according to my own experience, as well as surveying many people in reality, the winning rate is very low.
For example: Tidal Finance IDO had 183,221 registrations, but the number of people selected was 200 ⇒ The winning rate is… 0.01%.
If you don’t win the Whitelist, the price of the platform token also increases, so why isn’t it a sure win?
In fact, only if you are the FIRST people to buy these tokens at the Public Sale price, or before the first IDO news comes out, will you likely make a profit. If you enter in the middle or late stage, there is a high chance that the following combo situation will occur:
- Buy platform tokens at a price that is xxx compared to the Public Sale and xxxx compared to the Private Sale.
- Whitelist fails repeatedly like an AK47.
- BTC dumps like flood discharge.
- Some platforms get hacked, rug pulled, which can affect tokens in the same segment.
- Weak mentality, thinking that there will be no more IDOs happening on this platform.
- Stuck capital.
All of this combined creates a chain of stressful events, leading to selling tokens at a loss. Next, things don’t go as expected: IDOs still happen, BTC sideways,… leading to token price increase ⇒ Fomo buying back. You’re probably familiar with this loop, right?
See more: How to get Whitelisted in Crypto?
IDO is in the bag
This article is not for the past or present, but is used for future reference. Specifically, the IDO trend is likely to continue until the end of this year, or even longer when users are still too fond of this form.
To truly master the IDO “game”, in addition to relying on the above factors, you should play a new game, where you are the one who goes first. Those are new fundraising platforms like Samurai, Zeedo… or even in a new ECOSYSTEM like Solana with Solanium, Solstarter,… instead of projects that are too old like Polkastarter or DAO Maker.
IDO is truly an exciting game for big players, and is also a “trump card” to help change the position for small players
