The sale of a cryptocurrency, ahead of it going public, to specific investors.
This could be considered beneficial for both investors and the development team, if all was to go well and the digital currency was to be a success. While the project’s creators would receive much-needed funds to finalize the project, investors have the potential to acquire an altcoin that could be worth a lot more in the future.
Developers may also perform a pre-sale in order to create buzz ahead of the ICO, hoping for a price surge when the asset goes public.
It is worth noting that pre-selling can come with risks. If a project fails, investors can find themselves owning worthless tokens, unable to make a profit from their investment. This adds to the fact that, when the actual ICO takes place, the plethora of coins now available to the public might dampen the value of the ones they initially bought.
On the other hand, developers have to be wary of investors who might offload pre-sold token shortly after launch, making a decent profit.
It definitely doesn’t look good for a coin that recently underwent an ICO if early investors dump the coins they own at the first chance.