Choosing Right ICO To Invest In
The Initial Coin Offering market is becoming more popular with new ones cropping up on a daily basis. In fact, the advent of Blockchain technologies has brought about many innovative financial tools and without an iota of doubt, ICOs are one of the most innovative fallouts.
But over the last few months, it has skyrocketed with issues of fraud here and there. In the early years of ICOs, people could invest in most of the tokens on the market, and see fast and significant ROI.
But today, with the market growing exponentially, putting money into ICOs isn’t as simple as it used to be. The risk of failure is much higher than it was only a few months ago.
At the moment, ICO investing has become a long-term play, and investors looking for a quick return need to adjust expectations. It takes time to build Demand for and value in a token.
ICO Market
The fast-evolving market leaves ICO investors making more of a gamble than ever before. But with strategic research and analysis, investors can make wiser decisions at every step of the way.
If you are on the lookout for an ICO investment opportunity, tap these tips to increase your chances of striking gold. There are some formal criteria to consider when choosing an ICO and ignoring them can be very costly.
Team and Advisory Board
Getting to know the team and the advisory board behind the project can never be exaggerated. Have they been involved with other successful projects? Are there any industry notables on the project to increase credibility?
Tony Simonovsky, a serial entrepreneur and CEO of InsightWhale.com stipulates it is very imperative to watch out for any bad reputations to identify potential problems before you are in too deep. “Getting to know the team is a crucial step to determining where to put your money,” Tony points out
Demand for Product or Service
There is no sense in putting your money into a business idea that has no real-world usage. As a matter of fact, the same thing applies to investing in an ICO.
Is there even a demand for their product on the market? If there’s no demand and no practical application for what they are proposing, failure may be imminent.
These days many of the ICOs out there are simply like that. Tony recommends that such projects should be avoided like a plague.
Stage of Project
Also, one particular issue is to look at the stage the ICO has reached. Have they developed a working product, or is the token still being sketched out? What are their deadlines for moving the token along and introducing it to the market? If they are a whitepaper-only ICO, you may do a better job of finding that one ready-to-launch product.
Token supply
Moreover, every cryptocurrency has got a limited amount of supply. This is what gives them their deflationary nature and inflation proof.
Therefore, if, the team doesn’t have a cap on the number of tokens they are putting into circulation, it may be a good idea to step back until more concrete details emerge. A token can only appreciate in value if there is increasing demand in the market. It is basic economics. A vast supply will quickly depreciate the token. And a token that looks too similar to others on the market may get lost in the crowd.
Fundraising Goal
As a matter of necessity, every ICO should have a purpose just like the traditional IPO. What is the money being raised is going to be used for?
Looking at the fundraising plan and product development is a subject that must not be thrown out of the window. It is requisite to know how an ICOs fundraising goal aligns with product development needs.
Are they only raising enough to bring their product to reality? Don’t invest blindly. Make sure you’re aware of where your money is going, and what it will be used for, every level of the process.
Subjective Guidelines to Consider
As an investor, conduct research before you invest in any business idea or existing product. Even if it seems like an ICO is checking out, the answers to your questions can’t always be found through traditional research—and there are few trustworthy studies on ICO trends.
Do your personal research by going to the source. Get the insider view by joining their support channels, like Medium, Telegram, Facebook, Slack and Discord for the latest updates on the project.
Ask questions and consider the answers. Moreso, Pay attention to what the community is saying.
Things to be Wary Of
A company that doesn’t take the ICO seriously is not deserving of investing in. To be honest they will never take the project itself earnest.
When you evaluate the team’s approach to their ICO, be wary of warning signs that could signal failure. A team without a serious plan does not take the ICO process thoughtfully.
“Don’t be fooled, as they may just be riding the ICO train to raise money—and run,” Tony insists. “If their fundraising goals don’t come with a concise plan for development and growth, you are more likely to see unnecessary spending and lower return.”
Interestingly, Natan Avidan, the CEO and Founder of ORCA Alliance, an EU Blockchain Policy Advocacy organization believes, to begin with, let us agree that ICO is a risky investment because the product that you are investing in is not ready yet, however investors get the token and start trading it. He states:
“Normally the price of utility token should be influenced only by supply and demand. However, if the product is not ready yet the price is based on only speculation and market making. Considering those facts, I would suggest investing in ICO’s that have a working product and apart from trading, the token can be used instantly.”
Giving in to Hype
It is so easy to get caught in the hype of the crowd and the prospect of big returns. But don’t let your guard down. Be open-minded and keep analyzing and asking questions.
Just because the community is excited does not mean the company will deliver on its promises. There are so many projects that were hyped but never delivered any substance.
Huge discounts or unrealistic bonus structure
Big bonus or discount plans may look appealing on paper but are less likely to bring good results in the long run. Evaluate how the proposed discounts are structured. Can the company back this structure up with research to show they can fulfill their promises?
Nathan holds that discounts motivate people to dump their tokens as soon as they hit the exchanges and it looks like an easy flip. “Personally, I believe that bigger discounts significantly lower the token value from the very beginning. At the end of the day, it is all about the investment strategy whether you choose to flip or hold,” he said.
Escrow Matters
Bami Jinadu, one of the few ICO experts in Africa thinks you should run away if an ICO has no escrow.
“There should be an Escrow Company who will guide the roadmap and release funds accordingly. This ensures transparency and of course investors money being put to good use.”
The ICO market works like any other market. If a project is backed by a motivated team who is putting in the time and effort to create a product with higher demand, they are more likely to succeed. After you have taken the time to see how the team works, and how they plan to return your investment, take those facts and then go with your gut feeling.
