Understanding Soft Cap
Soft Cap is the minimum fundraising limit set by a project’s team, typically for an ICO or IEO. It is an arbitrary and speculative amount, in contrast to the maximum funding goal known as the hard cap. If a team fails to surpass the soft cap, they may choose to return the funds to investors or continue developing the project with the collected money.
Soft caps are not strictly enforced and serve as an approximate target for cryptocurrency startups or organizations seeking funds for a project. It is considered good practice for teams to provide an explanation for this amount and how it will be utilized. However, it is not mandatory to define a soft cap, as many teams have successfully raised funds without one.
Examining ICO metrics, including soft caps, can offer insights into a team’s expertise and understanding of their objectives. Unusually low or high soft cap values may indicate inexperience or raise concerns about the project’s legitimacy. Conversely, a well-defined and justified soft cap showcases the team’s experience and credibility.
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