What is softcap and why is it important?
Many projects in the cryptocurrency market organize a coin offering process (ICO, IEO, IDO, etc.) to issue their own coins. In this process, projects aim to collect a certain amount of funds from investors. However, this goal is not the same for every project. Some projects target very high funding, while others set a more modest figure. This is where the concepts of softcap and hardcap come into play.
Softcap refers to the lowest investment limit that can be received from an investor during the coin supply process. Unless the determined lower limit is met, the leading coin coin supply cannot be realized. For example, if a project has identified a $1 million softcap, anyone who wants to invest in that project must purchase at least $1 million in coins. If this amount is not collected, the project will be deemed unsuccessful and the investors will be refunded.
Softcap shows the minimum amount of funds required for the project to come to life. Therefore, providing the softcap is important for the reliability and potential of the project. Provision of Softcap indicates that it has sufficient resources to develop, market and operate the project. Also, the provision of the softcap signals to investors that demand for the project is high and their coins will appreciate.
Hardcap, on the other hand, refers to the maximum amount of funds that can be collected during the coin supply process. Once the hardcap is reached, the project accepts no further investments and the coin supply ends. For example, if a project has identified a $10 million hardcap, a total of up to $10 million can be invested in this project. If this amount is reached, the project is considered successful and the coins are distributed to the investors.
Hardcap shows the maximum growth potential of the project. The attainment of the hardcap is therefore important to the popularity and quality of the project. The arrival of Hardcap indicates that the project has received a lot of attention and its coins are in excess of demand. Also, the achievement of the hardcap signals to investors that the project has met its goals and that their coins will appreciate.
The concepts of softcap and hardcap play an important role for many projects in the cryptocurrency market. Understanding and following these concepts well can be beneficial for both projects and investors. Projects that achieve softcap and hardcap goals tend to be more reliable and successful. Investors can evaluate projects according to these goals and make profitable investment decisions.