Raise Your Hat, Not Your Cap

  • the main one is that setting a hard cap way over the actual sum the project needs and setting it over the actual market value of the project makes a backer realize that even if this cap miraculously gets raised, it will consume all the demand for the token on the market and there will be no buyer for it after the ICO; once having been listed on exchanges after the campaign, the token price will inevitably drop due to low demand, therefore for a backer it will be both cheaper and safer to buy the token after the ICO, when the token hits exchanges and the product of the project is already deployed;
  • another reason is that a project’s ability to deliver a good product relies not solely on a new concept, but also on a fundamental research of the market and its expectations; if one is unable to run such studies, no backer is willing to support the project, since it appears obvious a good product shall not be built on guesses and dreams of a fresh entrepreneur, but it shall be based on solid investigation of the market and have its goals carefully estimated and calculated;
  • in addition to the two above, let us remind everyone backers normally make a judgement based on what they can see and analyze and not what one promises them, so a project expecting a high cap without a reasonable basis for it would be naturally considered a scam and therefore ignored.
  • the first important point is that a low soft cap in the backers’ opinion does not seem to correspond with a high hard cap; again, this is not about a low soft cap itself but about a clearly designed project in which every part complies with the market standards; if a project sets a hard cap of, for instance, $20 million, and its soft cap of $1 million, it means either the hard cap is heavily overestimated and will cause all the problems described above, or that the soft cap is unduly understated, and thus, even if the soft cap is collected, the project might not have enough funds to start off and will probably take years to launch;
  • the second point to consider is that a soft cap is basically the border hitting which the project states it has gained enough support to start operating; if a project doesn’t reach its soft cap, it is required to refund all its backers — therefore a soft cap too low in comparison with a high hard cap is often a sign that the project neither realizes its true value and is hunting to collect as much as possible no matter what, nor it is actually willing to refund its backers in case of failure.

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