Author: Alpha New Sauce

When talking about token pre-sales, everyone always says that being an early investor is the key to getting rich. But have you ever thought: Why do so many people rush in and go all in, but you lose money? @CJCJCJCJ_ wrote a detailed teaching tweet, summarizing the main reason for losing money: because you don’t know what you are buying.

Let’s first understand what a pre-sale is and what you should consider before participating in one. This post will introduce the definition of token pre-sales, categories, pros and cons of each, and what I often do!

Token pre-sale is a form of fundraising for a project/protocol to raise funds for the team. The project gives you tokens in exchange for your funds to pay for protocol expenses, including marketing, salaries, development, etc.

There are several different types of sales before a token hits the market:

Pre-Seed (Highest Risk & Reward) Friendly Round (Friends Round) Seed Round (High Risk & High Reward) Private Pre-Sale (Friends Round v2) Public Pre-Sale (Retail) • ABC Series (Lower Risk & Reward)

For the topic of token sales, we will focus specifically on public pre-sales for retail rounds. So what are the different types of public pre-sales? Let’s take a look at the following diagram and explanation below.

Fixed Price No Cap Fixed amount of tokens sold at a fixed price Can raise $100 or $1M, will launch regardless, most will have a soft cap Most are garbage projects, just looking to make money Fixed Price Soft Cap + Hard Cap Set a minimum and maximum goal for how much money to raise If the minimum goal is not reached, the presale is cancelled and everyone gets a refund Presale closes when the minimum goal is reached or the maximum goal is reached Usually at a fixed price and fixed amount of tokens Most are projects by @pinkecosystem Premium Model No hard cap, but a fixed amount of money raised Tokens are distributed based on the percentage of the pool raised The more you invest, the more tokens you get, and unused funds are returned @MMFcrypto likes to use the premium model, and @velocorexyz has also used this recently NFT + Airdrops Raise funds by selling NFTs that may give you future airdrops Used by NFT projects and/or some Solidly forks NFTs with a purpose are a good sign, such as @ThenaFi_ and @ChronosFi_, and you can also stake NFTs to earn platform fees/royalties. Platform IDOs raise funds on the platform and may require holding their tokens to receive allocations Pinksale/Gempad do not require users to hold platform tokens, but will take a percentage of the tokens/funds raised by the team @impossiblefi allows both token holders and non-holders to participate, which can get better prices/larger allocations/less competition ITOs (Treasury Exchanges) exchange specific whitelisted tokens for their tokens For example, @Spiral_DAO's recent ITO allowed the use of USDC, CRV, BAL, FXS and SDT, while @PepesGame allowed the use of PLS ​​and USDC. Dutch Auctions / LBPs Starting price high, decreasing over time until all tokens are sold Tokens are added at a ratio of typically 99% Token A and 1% USDC/ETH, gradually trending downward over time until participants buy in Platforms like @Balancer’s LBP and @FjordFoundry conduct these auctions The most recent project to use this method is @ThalaLabs on Aptos Dynamic pricing Depending on the level of demand, more people participating in the presale can lead to an increase in the token price Everyone participates at the same price, the only thing that changes is the FDV/MC and the final price @CamelotDEX used this fundraising method

Now that you are more aware of the different types of pre-sales, let’s dive into the pros/cons of each and my take on them: → Pre-sales with no limits or hard caps are 100% stupid. If everyone who wants to participate participates in the pre-sale, then who will buy tokens on the market? 99% of tokens raised this way tend to go down when they are listed.

→ Overflow is nice, but too whale-friendly. Imagine if a whale contributed $1 million to a $5 million pool, and you only contributed $1,000, he would get 20% of the token supply, and you would only get 0.02%. People who don't participate "enough" tend to get crazier during the launch, and that's when the whales are happy.

→ Soft cap + hard cap is a good model, but the specific performance depends on the amount raised. If you are a memecoin project and raise $10 million, even if you reach the soft cap, the drop after the pre-sale will cause a drop if there is a lack of buying pressure.

→ Raise funds through NFTs and give airdrops, depending on the specific situation, NFTs are relatively illiquid compared to other tokens, but this is a good way to raise funds in terms of token diffusion while promising NFT holders a certain percentage of tokens to meet their "GIB AIRDROP" requirements.

→ Depending on which token sale platform you choose to use, participating in an IDO through the platform can be beneficial, especially if you are a supporter of the team and hold their tokens. Typically, the platform will take a cut of the funds or tokens raised if their services are used. @impossiblefi’s buyback program is the only one I’ve found so far that is designed to protect participants.

→ Treasury Swaps can be a great way to leverage existing tokens you already own (assuming you are bullish and/or have already bonded all your stablecoins) and use your own treasury for your project launch without having to market buy and incur slippage/fees.

→ A Dutch Auction is all about PvP against other buyers/sellers, as it is basically an open market, a game of catching flying knives and trying to time the bottom until others start to hype and buy frantically, but it is fair play for all.

Please always ask yourself the following questions before jumping into any token: → In the sale I participated in, was there any buying after the token was issued? If yes, hold/sell (it's up to you), if not, why not buy after the issuance? → Is this token pre-sale contract/platform secure? If it was developed in-house, can the developers cheat?

→ Are there any lock-up plans? How much does the token price have to rise to make up for the loss of my unlocked tokens? → What are the valuations of other rounds? What is the lock-up plan? → Who owns the liquidity tokens after the launch, will they sell? Why/why not? → Are there any OTC buyers for the locked tokens? If so, what are their rates?

→ If the product is not launched yet, is the valuation of this token reasonable? If it is launched, are the metrics reasonable compared to other projects and is it overvalued? → Is the team consistently opening additional rounds, like @SatinExchange? If so, steer clear.

What I usually do:

All in on overflow and then sell for profit Promote my Twitter and @C4dotgg Participate in private sales Avoid public sales unless recommended by friends PvP with other Degens in Dutch auctions Mostly buy callbacks after the project is launched Ask friends if the contract is safe so they can participate and invest money Wait for the product to be launched to review charts and indicators