Investing in an ICO

An ICO (Initial coin offering) is a means of raising crypto investment in a project. Losing steam lately, it is not going through its best times overall. This is due, first of all, to the crypto market’s...

An ICO (Initial coin offering) is a means of raising crypto investment in a project. Losing steam lately, it is not going through its best times overall.

This is due, first of all, to the crypto market’s general condition in 2018 and the fluctuation of the prices of virtually all major cryptocurrencies. And secondly, the confidence in ICO has hit the bottom as many projects that raised money on the 2017 hype have turned out to be scams and disappeared with the money.

What there is in the crypto world will stay in the crypto world — that is why it is impossible to recover money invested in scam projects. This background makes people look with suspicion at all new projects and this certainly does make sense. Thanks to a relatively easy process of launching an ICO, there may be ill-disguised scams as well as simple projects valid only in theory where you stand to lose.

Despite all these things, there are quite a few respectable practitioners working towards a bright technological future featuring excellent teams, ideas, plans and ambitions ready to invest time and money in the product development and generate benefits not only for themselves but for their dedicated investors as well. And luck will be with those who learn how to sort the wheat from the chaff and identify promising projects that will enable their invested capital to grow. Let’s discuss how to do it and what aspects deserve your scrutiny.

Unlike IPOs — the model typical of the «big» and «mature» financial markets, you do not have to own millions or be a pro investor to participate in an ICO. However, if you have some uncommitted funds, you certainly do not want to lose it or suffer losses when you invest in a project. Apparently, you want to grow your net worth, make a profit on a successful project or generate an on-going interest on your investment that will enable you to simply stop worrying about making money for the rest of your life.

So, your main task is to carefully explore everything related to the project and pay keen attention to some of its features signaling that it is a potentially successful one.

Key features of a potentially successful project

1. Uniqueness. Everything is simple — in all likelihood even a most incredible idea is already brewing in the minds of several people — and that is quite normal. However, the less original the project’s idea is, the more competitors there are. And winning this race will be more of a challenge. Of, course, somebody will be the winner anyway, but will it be the project you have invested your money in? So, if you select a truly unique one, it will, in all likelihood, fill an available market niche and bring you profits.
2. Demand. Logically enough, the market will get interested and accept only the projects whose relevance is obvious. If a project offers a unique and unbelievably cool idea that only a handful of people will find relevant, then, in spite of its attractiveness, it will not be the best way to spend your money. Even if the project goes through all development stages and gets implemented as conceived, the money invested by a handful of interested people will not, in all likelihood, bring you profits. You may recover the money you have invested in the project... But we make investment to get returns, right? Because you can keep your money safe without taking the risks that come with investing.
3. A clear-cut road map and objectives. All projects launching an ICO have a roadmap; however, it does not, always reflect the true state of affairs. In fact, the roadmap does not have to be a long one overloaded with detail (though some people believe it to be proof of the project’s comprehensive scope and, consequently, its bright future). It is more important for the roadmap to be free of bla-bla-bla that distracts one’s attention and specify the objectives (the steps enabling to achieve them) for the next 2 to 3 years in a concise and clear-cut way. Already before embarking on the project implementation, its developers should have a clear picture of what they intend to do, the way to do those things, their purpose and the time lines and to be able to demonstrate all this to prospective investors. This applies to everything — from the first code line to the ways to promote their end product. A more complete road map means that you are, most likely, dealing with seriously-minded developers. And what’s more important — they are aware what they are in for, what challenges they will face in the process and consequently they have at least some idea of how to address them.
4. Financial transparence. The White Paper is still another component of any project about to launch an ICO. The document should contain, among other, a detailed budget. You should read the paper very carefully and pay keen attention to the part that describes what the initial investment will be spent on. The token’s value after an ICO as well as the contemplated issue volume is no less important. As an investor you have a vested interest in the token’s continued price growth, but, in fact, its market value is not the only component that makes up your profit. If you bought tokens at $10.00 in an ICO and their price dropped three-fold during the development stage, don’t take it as a tragedy. Keep in mind that you buy tokens in order to provide funds to enable the developers of the project you believe in to implement their ideas. Quality projects take a long time to develop, that’s why patience is shrewd investors’ main ally. As soon as the project gets on track, the token price will rise again.
5. The stage of the project’s development. On the one hand, an ICO is an excellent way for very young projects to come into the spotlight and raise money for developers who do not have a cent to implement their ideas. On the other hand, already performing forerunners are more advantageous for investors. A minimum viable product shows that the developers have a clear idea of what they are doing. Moreover, a project is more likely to find its niche in the market a bit quicker if it boasts a minimum operational functionality. All this, taken together, is essential for investors, enabling them to assess the correlation between the team’s ambitions and potentialities as well as the market demand for the product and will help them take a well-thought-out and reasoned investment decision.

All the above is not, of course, a universal rule or rock-solid truth. Even if you put a plus against every single item on the list, this does not mean that the project will fly (though it is highly like to). It is essential to keep in mind that investment is always fraught with risk and you try to assess it when you apply all the above criteria to a project.