The Top 3 reasons why its dangerous to participate in private ICO deals

There is no doubt that 2017 was the year of the ICO, with no less than $4 billion being raised in funds over the course of the year. Love them or hate them, ICOs are transforming the worlds of investing and cryptocurrency.

ICOs have advanced into the public sector, making it easy for anyone to make their fair share of the profit. However, people often don’t know exactly what they are signing up for, leading to them getting scammed and losing out on their capital.

When you first purchase an ICO, it is expected that you go through the official channels. This way, you usually receive your token with no hassles. Then when that ICO hits the market, it’s recommended to trade them only on well-known exchanges.

However, things can get quite murky when issues such as private ICO deals start to pop up.

While it all seems like a simple process, you can get tricked along the way with private ICO deals. Currently on social media channels, such as Telegram, there has been an inundation of “private traders,” wanting you to invest directly into their ICO.

This seems innocent enough, especially when these traders offer you better prices and rates. However, in this article we give you the top three reasons as to why private ICO deals might not work out in your favour and can easily prove malicious.

1. Lack of Information?

When investing in any ICO, you need to do your research. Our site offers you the perfect platform to do all the research you need. Like all cryptocurrencies, ICOs are ungoverned and with that comes the expected risks.

This is where the problem comes in with private ICO deals. These deals offer you no tangible information about the ICO project. They can tell you nothing about the online presence, guaranteed profits, whitepaper, or roadmap of the ICO. Therefore, you know nothing about the risks of investing with the ICO they are trying to sell to you.

Even if the private trader is legit, if that ICO turns out to be a scam you could end up losing all your investment. If the private trader is nefarious, they could sell you false information about the ICO, promising all sorts of returns.

2. No Credible Market?

When you become involved in a private ICO deal, there’s most likely no interaction with exchanges. You and the private trader will exchange funds between yourselves. Someone who is caught up in a private ICO deal often knows very little about the cryptocurrency market and what ICOs token really cost.

All these factors enable the private trader to cheat you out of what the ICO is worth. Particularly in a private ICO deal for which there’s no established trading price on public markets, there’s no way of knowing if the price you’re offered represents fair value or not.

To be kept out of this danger zone, a public market is always recommended as it gives you an idea of fair price based on how others value the token over time.

One safer place for private trading is the OTC (Over-The-Counter) market. The OTC market does not make use of exchanges but is far more credible than a random trader on Telegram. However, this platform is not perfect for trading ICOs privately either.

The OTC market is usually where high net worth individuals, such as multimillionaires and billionaires, invest their capital into cryptocurrency. Mainstream exchanges sometimes can’t handle the vast amounts that they trade in and don’t offer much privacy, which motivates them to go OTC. Through online connections and word of mouth, they can trade their vast funds efficiently and privately. The market deals mainly in the larger cryptocurrencies such as Bitcoin, Ethereum, and Ripple.

This OTC market doesn’t always accomodate the average person wanting to invest in ICOs privately. It’s still the best option to use instead of regular exchanges.

3. Too Good to be True?

What must be the biggest reason for not going the private ICO deal route is the questionable legitimacy of the private trader. With everyone and anyone being able to create a social media account, you cannot know for sure who you’re really talking to… Could it be a scammer pretending to be someone associated with the project?

ICOs have long been associated with scams and phishing, and this only makes it more likely that the private ICO trader is not to be trusted. Criminals are clever and have numerous ways of tricking you out of your hard-earned money.

What the private trader could do is send you to a fake website for the ICO they are trying to sell to you. Here they could ask you to send funds to fraudulent cryptocurrency wallet addresses. One minute you think you are finally becoming part of the ICO craze and then all your money is gone.

The private trader could also send you to the official site of the ICO but tell you that you need to send funds to their wallet address as they are “working on behalf” of the ICO project.

Probably the worst is the fact that the private trader is after your personal information for identity theft. They could demand everything from your full name to your banking details to complete a trade. Money is one thing but once your identity is stolen the difficulties are never ending.

Conclusion

We recommend going through only trusted, official platforms when purchasing and trading your ICO. As you have seen, private ICO deals carry far too many risks.

If you do want to go the private route, please proceed with caution. Do as much research as you can into the private trader, the ICO, and the accompanying risks. Do not give particularly sensitive information away under any circumstances.

When dealing with any cryptocurrency trading, your security is the number one priority. Do your research. There are many blogs such as this one where you can read reviews and gain all the information you need.

The key is just to stay safe and enjoy your experience when you invest in ICOs.