Initial coin offers (ICOs) in cryptocurrency are risky investments. They have the potential to generate massive profits on your investment, but they also carry a high level of risk and volatility. Despite the risks connected with initial coin offerings (ICOs), large financial institutions such as Goldman Sachs and JPMorgan are beginning to consider investing in the sector.

Whether you have a large sum of money or a small quantity of spare cash, Bitcoin is an investment worth considering. Here are some of the advantages and disadvantages of a cryptocurrency ICO.

Pros

There’s a lot of money to be made here.

One statistic that should convince everyone to consider investing in cryptocurrency is that $1,000 invested in Bitcoin in 2013 would be worth over $400,000 now. Recent initial coin offerings (ICOs) have generated a slew of massive profits in a short period of time. Stratis raised $600,000 in their initial coin offering (ICO) in June 2016, and the price has since risen by 63,000 percent. During its initial coin offering (ICO) in January 2017, Spectrecoin raised $15,000 and has subsequently grown by over 13,000 percent.

Shorter time horizon

Because cryptocurrencies are more risky investments, it’s best to compare them. Datum launched their initial coin offering (ICO) in late October 2017, after raising $1.5 million in pre-ICO financing. Because cryptocurrencies are network-based, and Datum has already acquired widespread backing, investors should expect to be able to pay out their investments quite soon.

Liquidity increases.

To make a profit on your investment in a start-up, you must either find someone to buy the stock from you or wait for an acquisition or an IPO. None of these alternatives, however, allow you to choose when you want to pay out your investment.

Execution has a clear direction.

The fact that entrepreneurs frequently need to pivot numerous times and overcome initial speedbumps is perhaps the largest advantage of investing in bitcoin ICOs over start-ups. When you see a group of founders seeking seed funding, keep in mind that the firm they finally take public will be very different.

Cons

Volatility has increased.

Cryptocurrency ICOs are, of course, much more volatile than investing in the stock market or even real estate. Hacking attacks, for example, can cause investors to lose all of their money very rapidly. Granted, such extreme events are uncommon, but significant decreases in ICO value are not unheard of.

A network halt is a possibility.

Any cryptocurrency’s true worth is determined by its ability to create a solid product that a large number of people will desire to use. If, on the other hand, these networks fail to attract users or never get consumers to use the platform, the currency’s valuation will most certainly fall. A lack of network interaction has been blamed for several of the recent ICOs that have failed to perform after launching.

Potential shortage of resources.

The doors close and the network really takes off if a cryptocurrency ICO does not generate enough money or the firm spends more money than projected, much as startups can run out of resources and be unable to continue operating. Many cryptocurrencies are raising funds in advance of their initial coin offering (ICO) in order to secure strong financial commitments and demonstrate demand for the currency.

Mismanagement is a possibility.

Every cryptocurrency, in the end, is a business led by a team of entrepreneurs. A strong founding team is required for the cryptocurrency to successfully transition from the ICO phase to mass-market levels. Before investing in a cryptocurrency ICO, research the team’s background to see if they have the necessary skill sets and capacities to complete the project.

With new investment opportunities appearing on a daily basis, it’s vital to stay informed about your wealth management options.