What is Soft Cap?
Let's find out Soft Cap meaning, definition in crypto, what is Soft Cap, and all other detailed facts.
Soft Cap is a term used within the crypto sector when a project decides to launch an initial coin offering (ICO). It outlines the minimum amount of capital to be raised during the crowdfunding. There’s no system or guidelines that are applicable to every project. A soft cap is usually based on speculations.
It’s not a requirement for a project to establish a soft cap, however, it can be beneficial for the project’s team to set their expectations for the fund-raising by announcing what they have in mind for the received investments. Generally, it’s enough to fill in potential investors on where their money will be spent and why it’s needed for this project. But keep in mind that there are plenty of projects that have managed to raise the appropriate amount of capital without defining a soft cap.
Investors are able to get a clearer picture of a specific project and its team’s competencies by having a look at a soft cap, a hard cap, and other ICO metrics. If a project has a healthy balance between its soft cap and hard cap and well-established reasons for an ICO, it shows that the team behind this project is experienced and competent.
If a project does not reach its soft cap, then there are two options that the project’s team can choose. They can either return all of the money or keep the money and continue developing the project.
On the opposite side of the soft cap is the hard cap. It defines the maximum amount of funds that can be raised during an ICO.