How to Evaluate an Initial Coin Offering (ICO) Investment
A user friendly Guide on evaluating Initial Coin Offerings (ICO) investments.
The love for the cryptocurrencies is on cloud nine and the trend is expected to rise exponentially this year as well. The bitcoin evangelists continue to influence people to buy bitcoins and the results are evident. The popular trading platform ācoinbaseā crashed last year as it was unable to handle the sheer volume of bitcoin transactions when the value rose to $19,000/bitcoin.
There is no second opinion that crypto assets are worth investing. If you wanna make handsome money as the early bitcoin adopters did, you need to think BEYOND Bitcoin. There are hundreds of ICO opportunities floating over the internet each backed with a unique idea and asking for crowdfund for the conceptualization of their dream. You never know which investment may turn out to be a tenbagger and make you a millionaire.
But, everything which seems ātoo good to goā certainly has some flaws hidden within it. Figures of last year say that 46% of the ICOs launched in 2017 were scams or run away grabbing all your hard-earned money. You need to make an educated and well informed decision while investing over Blockchain projects.
You may be fascinated to buy a token which is costing less than a dollar or may be a cent. Things are tempting but before investing make sure that the Initial Coin Offering (ICO) is satisfying all the conditions listed below or scores atleast 8/10.
But before that understand the ICO process!!!
When a company pitches a revolutionary idea but is short on funds for its completion, it raises an ICO for crowd funding. In an ICO, tokens or the coins are created and destroyed using a Blockchain platform such as Ethereum. The company offers these coins to the investors/ pubic for purchase by buying them for fiat currencies or virtual currencies like BTC, ETH etc.
Founders announce the Initial Coin Offering (ICO) dates and the Idea of the project.
ICO may include Pre-Sales which is also known as pre-ICO.
A demo or alpha version is launched.
Hype is built on social media platforms and crypto-communities as well.
People buy tokens and the value of tokens post ICO is dependent on the performance of the company.
The complete process is to make people aware of the ICO or token sale process and earn recognition worldwide for maximum participation.
So, How to decide on investing in an ICO? How will you know that company will fulfill the promises and perform betterā¦Have a lookā¦
Understand who actually are driving the company. What is their idea and motivational force behind their venturing into Blockchain game? 90% of the companies are startups but hold a substantial backing of veterans and renowned entrepreneurs & advisors.
So, the first step is to verify the companiesā team portfolio. Explore online or social media such as Facebook, LinkedIn and get to know the technical and the business experts of the company. Affirm that the team strikes a good balance between the business trends and the technical advancements.
In case, the company is an established one, then verifying its credibility and track record may help you take an informed decision. A good company will always share the name of their team members either on website or on whitepaper or both.
2. Does the idea really resonate with Blockchain?
Carefully examine the idea and ask yourself does the company actually need a Blockchain solution? To be very clear, Blockchain development is an intimidating and expensive task. And poor coding can seriously crash the project or can leave many security loopholes. The reason for investing into Blockchain must be fairly justified. In case an alternate cheaper solution is available, then why the company is backing over Blockchain?
3. Market Scenario and Competitors
Analyze the whitepaper properly. Analyze the target audience as well as target market. Is the Blockchain project really offering innovative and useful to the humanity? The idea should be new and feasible. The whitepaper should have a well defined roadmap with vivid milestones.
There are many markets such as cyber security, healthcare, financial services etc, in which a lot of progress has already been made. If your companyās prospects are in these domains, look out what ānewā they are offering. The project shouldnāt be favoring obsolete technologies and should have a fair chance to stand against the competitors.
While analyzing the funding structure, have a deeper look regarding any previous investments and investors. Make sure that company isnāt totally dependent on the token Sale for its development. It should perfectly work even in case the company isnāt able reach the hard cap.
Take a deeper look into the investments and the token distribution. Make sure that substantial share has been allocated to development works and lesser to bounties & founders.
Itās always to invest in capped ICOs. As investing in an open cap ICO may not fetch you good returns. And the most pertinent thing is that āAre you happy with the fund distribution?ā. If yes, move ahead with the next factor.
5. Communicating with crypto community
A good website will clearly display the important key points from the whitepaper over the website. The company should also be following a communication channel such as Medium or Twitter to share the updates related to the project with the people.
Apart from this, there are various crypto discussion forums such as Bitcointalk, cryptocompare, cyberfund, icobench, icocreed etc. Have a look at the comments there or what experts are talking about the ICO? If you are not able to find your ICOin any of the top websites, I am afraid. itās a thing to worry!!!
When to reject at first go?
Well, the first step of rejection is when the company doesnāt have a whitepaper. The second follows closely. If the company is having a whitepaper, do read it properly and get a feel of the idea. The whitepaper should have properly defined roadmap, names of founders/advisors. If not, switch to another.
The third level comes with prototype. If the company doesnāt has a prototype or a demo version to show, that means they arenāt serious regarding the product. They should certainly share their proof of concept. In case the project is public, explore the number of commits made in the github repository.
Cryptocurrency investments are something which are irrecoverable in case of scam, fraud or theft. So, you need to be extra careful before making investments. Watch out for these factors as well.
Donāt buy from unlicensed sellers
Keep away from unsolicited deals or offers
No one is perfect, so always keep your mind and eyes open when an ICO portrays the ideal one or ātoo good to be trueā scenario.
Donāt invest in Uncapped or untimed ICOs.
The cryptoWorld is undeniably exciting, thrilling and profitable but there is a constant āfear of missing outā at every stage. Choose your bets wisely. Donāt be afraid of investing in cryptosphere, itās just thatā¦ Be cautious, aware and conscious of the risks involved regarding the investments in any ICO opportunity.
Want to know why people are interested in investing in cryptocurrencies despite of so many risks involved? Check out Bitboseās blog post here. Bitbose is the worldās first ever smartest crypto currency exchange which offers incredible opportunities for its investors in form of crypto smart portfolio management, fastest p2p transactions, ingenious fiat & smart crypto loans and emerging out be the first crypto smart bank in future.
Stay tuned on Medium or www.bitbose.com for latest updates on Bitbose.
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