In December 2017, I participated in a crypto token ICO (Initial Coin Offering). Lately it seems quite a few of my friends are asking me about my experience in crypto currency as an investment. This article should not be taken as advice, an endorsement, or a recommendation. It is just a random thought of the day.
Crypto currency has always been volatile, making huge gains in 2017 while turning a large number of people into millionaires. It aroused interest from mainstream public outside the IT field. When my friends and family ask me about Bitcoins, it seems to indicate a mainstream adoption and, also in my opinion, it seems to definitely be too late as an investment vehicle.
The main purpose of currency is to enable transactions within an organized society. In other words, you generally exchange currency to buy goods and services. If you would like to invest, it makes sense to trade in your money for investments that gain more in value. Therefore, I have been thinking crypto currency is more like gold rather currency monetary system.
The token I invested is was the Bread (BRD) token. Bread Wallet is a crypto currency wallet for iOS or Android devices. There are literally dozens (if not more) wallets for these platforms. The reason I like the Bread Wallet is because the application syncs directly to the peer-to-peer crypto currency blockchains.
Hence if the Bread Wallet app goes away, you don’t have to rely on the company to get your crypto currency back. I have not actually tried recovering my crypto currency this way, but I am assuming it is possible, which is a primary selling point for wallet applications. In general, the wallet is nicely designed, simple to use application. At the time of writing this, the released version only supports Bitcoins, but the beta application supports ETH (Etherium) and BRD (Bread) tokens.
When most people participate in alternative coin ICOs they are buying what the industry refers to as alt coins. Alt coins are generally anything other than the big crypto currencies of Bitcoin, Bitcoin Cash, Etherium, and Litecoin (although purist also tell me it is anything except Bitcoin). There are hundreds of different alt coins. Some alt coins maximize their value at just $0.01 USD and essentially die off. Some make a larger impact on the market, such as Ripple (XMR), which had a very low ICO prices and hundreds of percent in gains.
The point of an ICO is for a company to raise capital. Essentially think of it this way: if a casino is about to open, it might sell 10 chips for $1 USD. Basically, you are giving them $1 on the hope that those 10 chips are going to have a value. Some ICOs will tell clearly tell you what the value of the coins will be. In the case of Bread Tokens, the intent was made clear in this white paper:
Their value statement basically was that the BRD tokens would be used as a type of rewards program. BRD could be used to lower transaction fees, provide personalized service, and be used as discounts for other future financial services. This is all fine and good, but most people want the tokens or ICO currencies to be traded on an exchange in order to make a profit due to their purchase price.
Now let me clear: Bread Wallet intended their tokens to be used as rewards program. Having it listed on crypto currency exchanges and having the price fluctuate is what the investing community expects. The Bread Wallet, as a company, cannot solicit exchanges or speak about how much BRD (bread tokens) should be valued at beyond their intended usage.
Depending on when you purchased BRD tokens naturally determines how much you paid for them. During the initial sale of BRD, the purchase price was approximately 900 BRD tokens for 1 ETH. This makes things a little complicated for understanding how much you are paying for BRD tokens due to ETH fluctuations and other factors. Buying into most ICOs today is done using ETH. The price of ETH is steadily increasing, so it is becoming a more valuable crypto currency. You will need to consider if it is worth trading your Eth for an unproven new crypto token. You also need to take a look at how much is your ETH worth. If you purchased ETH at $10 vs. ETH at $700, it might a big difference on how much ETH you are willing to trade for BRD (or any other ICO).
The ICO experience was relatively easy. If you had iOS device, you simply downloaded the beta Bread Wallet application. BRD tokens were being traded via ETH. You simply transferred some amount of ETH into your Bread Wallet app. When the ICO sale opened, you then purchased your BRD tokens with ETH. As to be expected, there were a few issues with the initial sale. This included some false starts, people losing money on transaction fees, not being able buy tokens, and a few upset wallet users. Bread did manage to get everything fixed and working correctly within two hours, and I was buying tokens.
A short time after the crowd sale ended (I can’t exactly remember when, I think perhaps a week later), the crypto exchange Binance listed the BRD token for trade. I essentially purchased my BRD tokens for $0.77 USD. The price quickly opened to $1.50. In the few weeks since the crowd sale, the price went around the $2.31.
With many ICOs there are large investors always buying and selling (called pumping and dumping) which makes the price extremely volatile. Day traders will sell on shorter term gains and buy back when the price suits them. Of course, the enthusiasts are hoping to just hold on until their favorite ICO becomes the next big thing.