Today we want to talk about a hot topic in the crypto world: presales. Lately, we have seen a lot of solid projects launched that will be talked about for months and years to come. However, we have also seen too many clever people who have created their tokens for one purpose and one purpose only: to dump their assets on inexperienced investors. We will now explain how it all works without mentioning any names, but it will take very little to understand who they are. A quick read through the token economy of each project is more than enough to discover the ‘smart scams‘ (let’s call them that) from the serious and legitimate projects!
The token economy of SCAM projects (too much from the presale released immediately)
These smart scams have been able to convince even big names to invest in their projects or make partnerships with other popular crypto projects in order to appear legitimate. They also manage to get their IDOs onto serious sites, so at first glance, one might think the project is great! Unfortunately, this is not the case! I’ve participated in a lot of IDOs lately with very respectable teams and top investors who have done nothing but dump their tokens on new investors.
The token economy of these scam projects is usually composed in the following way:
- 30-60% tokens sold in presale at near-zero prices.
- 1-5% of tokens sold in the IDO phase (public presale).
- 80-100% of presale tokens unlocked in the first 3-6 months after project launch.
These are usually the main characteristics of a SCAM project that doesn’t give a damn about the long term but just wants to make a quick quid, fooling and deceiving inexperienced crypto users.
To better understand why these projects should be avoided, here is an example of how the SCAM works: Some ‘companies’ together with the team itself and friends and relatives of the team buy tokens at 0.03 cents each. This is the private pre-sale (or seed) phase. Then the project allocates 1-5% of its tokens to a public presale, where tokens are sold for 0.05-0.06 cents. At this stage, tokens are usually sold to very few people (100-300). Finally, there is the long-awaited listing on Uniswap, characterized immediately by a couple of huge purchases (made by BOTs ready to increase the price of each token 20-30-50-100 times) who will then dump their tokens on you. So a normal person will buy the token at a price 10-20-30-50-100 times higher. In this way, the final price becomes 1-2 dollars per token. Now consider this. The situation is quite normal for serious projects, where there are no presalers who will sell right away but only the few lucky ones who bought in the IDO phase, i.e. 100-300 people (and this is not a big problem since long-awaited projects usually make 20-50 million dollars in volume in the first 24 hours, so these small dumps are bought right away and the price remains stable).
However, the situation changes when the project ‘unlocks’ 25-33% of the presale tokens during the TGE (token generation event). This way there will be millions of tokens bought at 3 cents that everyone will sell right away, since the price is now 30-60 times higher than their purchase price. Would you not sell if you were faced with a similar situation? Of course everyone would, creating scary dumps for new token holders. Projects like this usually unlock presale tokens in the second and third month, creating insane sell pressure and showing that they don’t care about the project. And trust me, a lot of projects are doing this lately, so there are a lot of people losing money to these SCAMMERS. Yeah, that’s the appropriate term for such projects.
Presales in SERIOUS long term projects
I’m not saying I hate presales, on the contrary! Serious projects, such as Uniswap and the like always have pre-sales to help them develop the project as they have money available immediately and do not have to ask for loans. But these types of projects usually lock tokens sold in presale for 2-4 years (or more), releasing a little bit at a time. Maybe they release 5% after 3-6 months with a linear release, avoiding huge sales in the initial phase, i.e. the phase in which the project has to be launched, convincing new people to invest in the project and growing the brand.
Don’t be fooled and always read the token economy of a project before buying. If there are too many tokens sold in the presale and they are completely unlocked in 3-6 months, the project is CRAP!