Do you know how important secondary market is for your IEO project? If you think an IEO project is over after the fundraising is completed, you are utterly wrong.
An IEO project goes through several stages. The last stage is called Post IEO stage. This stage takes places after the tokens are sold and listed. In this stage the tokens are listed and traded in the secondary market.
Many token issuers often ignore this part of IEO. It is one of the main reason why IEO projects fail. But if you approach professional companies for IEO Development Services. They will help you to take advantage of the secondary market as well.
In this post we are going to educate you about secondary market and show you how it is an important part after fundraising is completed. But before we need to understand what exactly is a secondary market and how it works. So let’s begin.
Secondary Market
It is a platform where tokens are traded. After the IEO is launched, the tokens are first sold. And once the funds are raised, the tokens are listed on exchanges.
Exchanges function as a link between the investors and the token issuers. Once the token issuers distribute tokens through exchanges, they are traded in the secondary market.
In this market, the trade of tokens takes place between investors rather than token issuers. The investors buy and sell the tokens among themselves on the exchanges. There is no involvement of token issuers here. It is more or less like shares that are traded between investors in the secondary market.
How secondary market works?
The secondary market in IEO works the same as it does for trading shares. It can be explained easily by comparing it with stock market. So if a company wants to raise funds through fiat currency, they start an IPO.
In an IPO the company sell the shares to the investors directly. After the funds are raised, the shares are traded in the stock market (secondary market). Here there is no involvement of the company. The shares are traded between investors. The investors use the price difference in shares to earn profit. The shares are bought and sold through middleman called brokers.
Similarly, in an IEO the company issues tokens instead of shares to raise money. These tokens are first sold to investors directly. Once the funds are raised, the tokens are listed on exchanges for investors to trade. Now the investors can buy and sell the tokens among themselves with the help of a middleman called exchanges.
The investors use the price difference in tokens to earn profit. This is how tokens are bought and sold in the secondary market without any involvement of the issuing company.
Example
Let’s understand how secondary market functions for an IEO with the help of an example.
Company A wants to raise funds through an IEO. They approach Exchange B to sell and list their tokens. The IEO is then launched and tokens are sold.
Once the funds are raised, the tokens are listed on Exchange B. Now investors who have purchased the tokens can sell their tokens through exchanges among themselves. Investors C can sell the token to Investor D at a price difference to earn profit from the sale.
This process keeps going on. It will help your IEO project to remain in the business and the market for a long time and enjoy continued success.
This is how secondary market helps the investors to trade the tokens within themselves.
Fundraising and secondary market
Fundraising and secondary market goes hand in hand. Without fundraising there won’t be any secondary market. Fundraising is known as primary market.
The tokens are first issued in fundraising or primary market. The already issued tokens are then traded in the secondary market.
In fundraising, the investors directly purchase the tokens from the issuing company. In secondary market, the investors purchase the tokens from other investors.
During fundraising the token price remains the same. In secondary market, the token price keeps on fluctuating.
In fundraising, the funds are raised for the issuing company. In secondary market the trading of tokens generate profit for the investors.
Fundraising is done only once. In secondary market tokens are traded again and again.
