The evaluation of an Initial Coin Offering includes many factors. Every potential investor should go through the statistical information before considering a purchase.
Many of us may not be aware of the difference of Hard Cap and Soft Cap, but there is a major distinction between capped ICOs and uncapped ICOs.
ICO Hard Cap
The Hard cap of an ICO means the maximum amount of capital that it aims to gather. Most of the active and upcoming cryptocurrency projects set the hard cap very high. Most of the set hard caps are unlikely to be reached.The hard cap is the number of the maximum capital needed and projects will mostly stop accepting additional funding after the hard cap.
ICO Soft Cap
Soft Cap refers to the minimum amount of capital raised that will determine the success of the crowdsale and will help the venture to progress forward as intended. Most achieve the ICO soft cap target since Initial Coin Offering is a great way to start a new venture and raise funds.
Capped and Uncapped ICOs
Not every ICO has a set cap limit on how much capital they will take. In capped Initial Coin Offerings the excess money is returned to investors after the hard cap is reached. Overhyped ICOs can reach their hard cap in less than a minute. The pros about a capped ICO are that there isn’t an overflowing of investors and the ecosystem is kept healthy. This benefits long term holders because there isn’t excessive selling at the beginning.
An uncapped ICO collects as much as they can. A lot of the bigger ICOs go for an uncapped execution of the crowd funding. A positive side effect is that the project and the team behind it have more funds to work with and to spend on expansion and marketing. A plus for the investors is that everyone gets the tokens they want. A negative about it is that an excessive amount of token holders and aggressive investors may prove to be unhealthy for the long term of the project. The most aggressive investors that buy cheaper tokens in the ICO usually aim to sell them immediately. These quick profits cripple the progress and the price of the coin.