Look out for these things before investing in an ICO
2 min readNov 4, 2017
- Abnormally huge bonuses.
You’re probably thinking “How is this a red flag? Its a better deal for me!”. Well in all honesty its a good deal if you want to lose your money is what it is. If somebody invests a large amount at the beginning and receives a 30% bonus with a substantial amount like - $100,000.00, a 30% gain once the token hits the exchange is a very good instant return. Its more than likely that investor will take their $30,000.00 profit and exit. While this is happening, all the little investors are either going to panic sell or carry the bag since they didn’t make enough profit to sell as their investment was a lot smaller. - Referral links with big MLM style bonuses.
Again this may seem great, earn more tokens — all you have to do is share with your friends, etc. But do you really want to extend your losses to your friends and family? Referral links with bonuses devalue the already worthless token and only shows how desperate and greedy the company is to sell their garbage ICO to the maximum. Please don’t fall for this and involve your close ones in a money grabbing ICO. The whole concept is shady and screams MLM/Ponzi. - Lack of blockchain usage or technology not requiring blockchain.
If there is an ICO project that has no advantage to being semi/fully decentralized you may as well stay away. In order for token prices to increase, the project needs to be disruptive and demand for the token or cryptocurrency needs to be there. Over 80% of the ICO projects we have reviewed had no use for their token… It was all speculative value, yet they were traded immediately on exchanges only to plummet under the initial coin offering value. - Over the top advertising budget.
When an ICO company starts paying celebrities top dollar to promote their product its likely going to be a terrible or overvalued project. They obviously can’t get attention on their own for their tech, so they seek external help from well recognized people. Think about how long it took for Ethereum to get the crazy amount of publicity it has now and how long it took to get to the front page of WSJ… It didn’t all happen within 30 days of domain registration and Paris Hilton tweeting about it.
Hopefully this content helps people understand some of the bigger red flags we look for in an ICO. If this post sparked your interest, we recommend you check out our criteria on making proper ICO judgements at the link below:
