How Crowdfunding Impacts the Crypto Market

Gabriel Mangalindan

Into tech, AI, startups and blockchain

Crowdfunding is a process where an organization raises funds for their project by asking the public directly instead of going to institutional investors. When it comes to the cryptocurrency market, crowdfunding has grown to become one of the most important parts of the ecosystem.

Crowdfunding in the crypto space started in 2013, with the first Initial Coin Offering (ICO) for Mastercoin. Later ICOs gave birth to projects that include Ethereum, Polkadot, and Polygon. NFT mints are another form of fundraising where project owners raise funds by allowing users to mint NFTs in exchange for a fee. 

Below we’ll look at crowdfunding and how it relates to the crypto market.

Crowdfunding has a lower barrier to entry for project founders

Crypto projects trying to get off the ground and raise seed money may not have the resources to devote to seeking conventional sources of funding. Crowdfunding enables founders to get their project in front of the appropriate people and is more efficient and effective than trying to acquire a loan or find investors on your own. Founders can crowdfund directly on their site via an ICO or use a platform to run an ICO or Initial Exchange Offering (IEO). 

Founders can convey their projects’ narrative, offer incentives for early investors (i.e lower token prices shorter lockup periods, etc.), and if using a crowdfunding platform they can benefit from having everything in one centralized area where their project can be easily discovered. 

Projects can use social channels to kickstart their communities 

Crypto projects usually create Discord and Telegram communities where prospective investors can speak with the founders, stay up to date with the latest news and discuss the project with each other. To develop social proof for their projects, founders need to attract clients that are interested in their product or service. It’s more probable that people will accept their concept if early adopters have already done so. A big number of supporters, pre-orders, or media attention is all forms of social proof that may be used to your advantage when making a presentation to additional investors.

Communities can help founders to fine-tune their projects

Interested investors may poke at weaknesses in a project’s service or strategy. The truth is that project founders don’t always have things figured out and it’s not uncommon for projects to pivot away from their initial concept. Feedback from investors can play a role in the development of a project, these investors will often test out beta versions of the project and point out any pain points they come across. Founders should take this feedback on board and see these investors as early users of their product or service.

Starting a business is all about identifying a critical, unmet need in a project’s target market and taking action to fill it. Founders should take advantage of any input they get from customers and incorporate it into their project’s strategy. Crowdfunding has the advantage of bringing project founders closer to their investors and users, allowing them to interact with each other and respond to their inquiries, concerns, suggestions, and ideas.

Early adopters can help projects grow in the crypto space

Investors and early adopters and prospective brand champions help crypto projects to grow and gain additional users. They’re the ones that put their money where their mouth is when it comes to your narrative, product, or service. Early adopters can help crypto projects to succeed by spreading the word about the product or service that is being offered. These early adopters often become evangelists for the projects they are invested in.

Conclusion

Crowdfunding has played an important role in the crypto market, helping to bring us new advancements, blockchain networks, and technologies. By working together with early adopters and community investors, project founders can bring new innovations into the crypto space.