The disadvantages of initial coin offering

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INTRODUCTION

Well do you know that since the introduction of the initial Coin Offerings (ICOs) have emerged and has become a very popular method and means within the realm of cryptocurrency and the block chain technology as a whole.

Getting to become this popular in the world of cryptocurrency was no easy feat on the part of the initial coin offerings and it got here by offering and promising avenue for startups and platforms to raise funds and capital, although they are not without their challenges and potential risks.

Like I said earlier the initial coin offerings with their promises are not without setbacks and risks so therefore in the paragraphs to follow I will be we will delve into four significant disadvantages associated with ICOs.

DIS-ADVANTAGES OF INITIAL COIN OFFERING

• Regulatory Risks

One risk of the initial coin offering is the pressure of the legal and regulatory bodies, particularly in states and countries where the regulatory bodies have concerns and are yet to accept or embrace the initial coin offerings in their jurisdictions.

Many of the initial coin offerings projects are hosted and operated in a areas and jurisdictions where the legal and regulatory frame works are shaky and uncertain and as a result raising concerns about compliance with laws laid down to ensure security like the anti money laundering regulations, and taxes.

Basically governments all over the world are increasing their surveillance and scrutinizing the initial coin offering projects and also applying and taking measures to regulate and maintain oversight of the industry, including actions to reduce fraudulent activities.

• Lack Of Regulation

Another challenge and one of the foremost risk and disadvantages of the initial coin offerings is the absolute lack of regulatory oversight whatsoever.

Yes, in contrast to the traditional securities offerings, the initial coin offerings operates in what seems to be a relatively unregulated landscape and as a result leaving investors vulnerable to risk of fraud and manipulative activities.

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Additionally, the absence of set down regulations and guidelines by regulatory bodies opens the door to fraudulent activities and leaves the system vulnerable to pump and dump schemes, where manipulators artificially inflate the value of a token before selling off their own holdings and shares.

• High Potential Of Failure

Another disadvantage or challenge and one of the most significant risk of the initial coin offering is the potential or risk of many of its hosted and ongoing projects to fail as a result of one circumstance or the other.

As we all know the cryptocurrency market is highly volatile and this is one factor and inescapable circumstances that leads to failure especially when the majority of the initial coin offerings projects fails to deliver on their promises of sustainability and growth.

Because of the high risk of failure investors are therefore prone to the risk of losing their entire investment and funds if the project should fail to succeed or to gain attraction and users or stumbles on regulatory challenges.

• Volatility

Initial coin offerings is typically a speculative investment with the same risks relative to that of gambling, it is also subject and prone to extreme price volatility and severe fluctuations of market trends.

However, in contrast to the traditional financial assets or money, which are depended and backed by tangible assets or massive revenue or profit generating businesses, the initial coin offering tokens derive their value and prices basically from speculation and market sentiment.

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The depending and relying on speculations for token value or simply the speculative nature of the initial coin offerings exposes it's investors to significant risk, seeing as token prices can experience rapid fluctuations and therefore leading to loss.

CONCLUSION

In conclusion, while Initial Coin Offerings might offer startups and new business an innovative means of raising capital or funds and the opportunity of engaging in a pool of global investors they are also packed with disadvantages, risks and possible hindering block that will warrant careful consideration.

And as the cryptocurrency industry continues to evolve, it is becoming ever essential for stakeholders and investors to address these possible setbacks and work towards finding solutions and creating a more transparent, secure, and sustainable fundraising platform.