Initial Coin Offering (ICO) is a term that is often heard in the crypto asset world. But, really, what is an ICO?
In general, an ICO is a medium for raising funds through the offering of a new type of coin and/or a new crypto asset service. In this case, the coin is a crypto asset.
Later, investors who are interested in it will make several offers, either with other crypto asset , such as bitcoin or real money. Then, investors will get a new crypto asset token specifically for this ICO.
The token contains the amount of coins received by investors who have given a certain amount of money. Then, the crypto asset company will use the money from the investors that it has obtained as a tool to achieve the goal, which in this case is launching a product or starting a digital currency.
Related to this, investors will get a profit if the value of the new coin continues to rise against the real currency.
What is an ICO and how is it different from an IPO?
Basically, there are similarities and differences from ICOs and IPOs or Initial Public Offerings that usually occur in the stock market. In line with IPOs, in ICOs, new coin companies also need funds to operate their companies. Therefore, the company that conducts the ICO will sell some parts of its new coin to investors.
However, the difference is that if the IPO offered is part of the shares in the company, the ICO offered is part of the total number of coins in circulation.
In this case, the new coin company will inform you about the total coins that will be in circulation. Then, during the ICO, investors will bid the number of coins they want to buy at a certain price.
Later, after the ICO period is complete, new coins will be released to the public. Then, the general public can buy this new coin in order to transact or invest. However, this ICO has a fairly high risk of loss. The reason is, perhaps, after the ICO period is over, the company might immediately go bankrupt or the coins won’t even sell.
Therefore, it is important to know that these ICO participants are generally people who already recognize the risk of profit and loss in investing in new coins.
ICO Goals—What Is ICO
It is important to underline that the money needed to develop a crypto asset product is quite large. Therefore, in general, ICOs will be offered by coin developers in order to raise money.
In the future, the money will usually be used to maximize the development of the developer’s company’s digital coin project.
Later, the funds raised from this Initial Coin Offering(ICO) process will be allocated to a number of things, mainly in the context of developing and marketing this coin project.
What are the Advantages of ICOs?
With the Initial Coin Offering (ICO), developers will receive financial assistance in order to accelerate and optimize the development of the digital coin project so that it can be enjoyed by a wide audience.
Through involvement in the Initial Coin Offering (ICO) before the coin is released to the free market, investors will benefit from getting the coin at a lower price.
How to Arbitrate at Indodax
Do you know what an ICO is? Now, it’s time for you to find out how to join the project by buying coins through arbitrage on Indodax.
According to the online Big Indonesian Dictionary (KBBI), arbitrage is the simultaneous buying and selling of the same goods in two or more markets with the hope of making a profit from the price difference. In practice, arbitrage is a way when traders try to profit from the price difference between digital assets in two different markets.
This can happen because not all digital assets have the same “exact” price in every location or market. Even though it sounds simple, there are lots of traders who do it in an inappropriate way. For example, you are a member of two platforms for buying and selling bitcoin (BTC). In this case, suppose the first platform is A, while the second is Indodax.
Then, one day, you see the selling price of bitcoin on Indodax at Rp. 155 million, while on platform A the price is Rp. 150 million. In the momentum of this price dispute, you can directly buy bitcoins on platform A and transfer the bitcoins to Indodax. Then, you immediately sell the bitcoin on Indodax.
The obstacle felt by traders in this regard is processing time. The reason is, the process of buying and selling digital assets takes time. Although it does not take a long time, it is possible that in that time the price of digital assets can change up or down. Although it has its own risks, this method remains the choice among traders.
On the other hand, to minimize losses, you must have a balance on both platforms earlier with the same bitcoin balance and volume. For example, you have 1 BTC and IDR 150 million on both platforms. When Indodax has a higher selling price, which is Rp. 155 million, than platform A which has Rp. 150 million, then at the same time you have to sell 1 bitcoin that you have on Indodax and make a purchase on platform A with the same amount of bitcoin volume.
This means, now you have a balance of IDR 5 million and 2 BTC on platform A. At this stage, you have pocketed a profit of IDR 5 million. Furthermore, to return to the initial nominal, you can transfer 1 bitcoin that is on platform A to Indodax and make a withdrawal of Rp. 155 million from Indodax, then deposit Rp. 150 million to platform A.
That way, you can have the same bitcoin balance and value as in the initial conditions. After deducting transaction fees, you will then get a profit of approximately IDR 5 million directly from the remaining difference between the two prices.