Published On: Fri, Oct 29th, 2021

IPO Vs ICO: This Is What You Need To Know


LAGOS OCTOBER 29TH (URHOBOTODAY)-If you’re new to the global investment markets, you’ll probably have encountered various examples of jargon and unfamiliar terms.

These include ICOs (initial coin offerings) and IPOs (initial public offerings) which are used in the crypto and stock markets respectively and represent various ways of raising large amounts of funds.

We’ll explore both concepts in detail below, while appraising the core differences that separate them in the marketplace.


ICOs and IPOs Explained

An ICO is synonymous with the cryptocurrency marketplace, as it provides crypto startups a viable and secure way to raise funds.

In most instances, a startup organises their ICO prior to allowing any trading activity for their associated token, using the subsequent capital to launch their coin and build the underlying tech stack.

In 2017 alone (which saw a sustained, Bitcoin-led crypto bull run), cryptocurrency startups raised more than $5 billion through ICOs, highlighting their impact and popularity in the marketplace.

While the purpose of an IPO is also to raise funds, this particular vehicle achieves this by requiring a privately owned business to transition into a public entity that’s listed on a stock exchange.

Famous firms such as Facebook have launched large-scale IPOs in recent history, listing a total of 421.2 million shares on the New York Stock Exchange and raising $16 billion in capital in 2012.

IPOs have existed for generations, also providing a viable funding mechanism for large football clubs like Manchester United. Often referred to as ‘floating assets on the stock exchange’, this can draw investors from across the globe and raise huge amounts of capital depending on the viability of the equity in question.


What are the Differences and Similarities Between These Entities


Ultimately, underlying stocks and crypto assets are fungible and tradable through platforms such as the MT4 webtrader, while both ICOs and IPOs are large-scale vehicles used to raise funds for private entities.

However, the way in which funds are raised vary between these two vehicles, as while going from a private to a public company is a stringent and formulaic process that’s subject to the Securities and Exchange Commission, ICOs can be organised by anyone with a whitepaper and are scarcely impacted by regulatory measures or frameworks.

Obviously, IPOs also reward investors with proportionate shares and a stake in the underlying business, whereas no such reward is on offer for ICO participants.

Instead, they’re often awarded a fixed amount of tokens based on the size of their investment, from a total circulating supply that may or may not appreciate in value over time.

This arguably makes ICOs slightly riskier for participants, although this is also indicative of the inherently volatile crypto market as a whole.





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