The revolution of the traditional finance market through the cryptocurrency or digital currency is already on the way. With the different advantages, the blockchain technology has shown over the traditional market in terms of security and ease of transaction; the parity seems to be tipping in favor of the crypto market in recent days.
Although this technology has been around since Satoshi Nakamoto released the white paper in 2008 for bitcoin, the growth and development of the digital currency, which is known as a cryptocurrency, have seen a notorious growth since then.
From online secured transaction to decentralization of the system, the cryptocurrency industry has grown remarkably.
What Are Crypto Funds?
Basically, crypto funds can be described as a source of digital currency which is allocated for specific purposes. As compared to the traditional financial market, there are well over 500 different cryptocurrency funds which are currently flooding the market and more to come. This current surge in the number of crypto funds in this relatively new market can be attributed to two main reasons. These two reasons are lack of regulations and little competition.
The various government of almost all country around the globe are still yet to consider cryptocurrency a means of legal tender. This factor has placed cryptocurrency in the commodity or product category which makes the regulations of the legally recognized currency not applicable.
This unregulated grey area and lack of competition yet as compared to the traditional investment space is the main reason investment bodies are trooping into crypto funds.
These crypto fund types, however, can be classified into three main categories namely:
1. Crypto Hedge Funds
This is the most common type of funding available in the crypto market. This is a speculative type of investment which pools capital from individuals and private bodies in the digital market space. Crypto hedge fund majorly invests in high risk and speculative investments.
2. Crypto Venture Funds
Crypto venture funds are funds which are made available to start up or small companies that have the potential of growth. These venture funds are contributed towards the equity of the upcoming companies in their equity token offerings. They also contribute in their initial coin offering (ICO).
3. Crypto Hybrid Funds
The crypto hybrid fund is a combination of crypto hedge funds and crypto venture funds. This gives the investor a wider range of opportunities not available to the singular crypto funds.
Crypto Funds And Initial Coin offering (ICO)
The initial coin offering is a tool used by cryptocurrency platforms to raise funds essentially. This is most times likened to the well-known Initial Public offering (IPO) in the traditional investment market. This offered coin is exchanged for either fiat currency or other form of cryptocurrency. This fund is then used to develop their platform to the promised level.
The investor, however, believes their investment is a valuable one and will hope to see their investment grow through their buy-in from the offered bought coins.
Nitty Gritty of Initial Coin Offerings (ICO)
From the inception of the company, there has to be a whitepaper which details the goal and target of the company. This white paper also details the amount of money the company would need to reach its target. Most importantly, it details how much the token bought at the initial coin offering (ICO) could worth after a period of time.
During the ICO campaign, the interested enthusiast buys tokens with fiat currency or other forms of cryptocurrency. These tokens are otherwise known as shares in the traditional companies. The value of the token bought increases over time and can be sold, or more can be bought.
The initial coin offering is decentralized, and this guarantees security and openness. It is also unrelated. This gives the coin offering an unbounded state in contrast to the IPO. In terms of structure, terms, and condition of use, the ICO is much freer than the IPO.
The new cryptocurrency companies have to bring realistic figures to the table and convince both the crypto funds investors and private investors about why they should invest in their company. It is also very essential that the business is already an established business.
It is also imperative that the funding token and payment methods be prepared readily for the Initial coin offering (ICO).
It is also important to target certain crypto funds investor in order to reach the desired mark and to drag along other interested investors.
Crypt Funds Advantages For ICO Fundraising
Smart investors look for promising new and upcoming companies to invest in. The different crypto funds available are tapping into the opportunity still available in the novelty market of digital currency funding.
Due to it upregulation and a grey area of operation, the crypto funds are able to invest without having to worry about regulations and restrictions which binds the IPO for the traditional investment market space.
Although there are more than 500 crypto funds available to newly developed cryptocurrency companies, the companies now have hedge funds from the crypto hedge funds companies that can be invested in it. This saves them valuable time that can be used for the development of their platforms.
There are also the crypto venture funds that contribute towards the equity of the new companies in their ICO.
To Wrap It Up
Starting from the white paper in 2008 from Satoshi Nakamoto, the impressive and notorious growth of the cryptocurrency market has been unprecedented. This is coupled with the various applications of the blockchain technology in many markets. This has caused more companies to turn towards the blockchain and thus the use of cryptocurrency.
The advantages of the blockchain technology which ranges from the security of transaction to openness and anonymity of the transaction, there is every other reason why investors should invest in this digital market.
Crypto funds is another investment opportunity for the inclined investment personnel. Based on the growth and development of this notoriously growing market, the positive investment return is almost guaranteed.