Aug 24, 2018 · 5 min read

Factors that you should Consider before investing in ICO

The popularity of ICOs is rising day-by-day. This growth has been going through the last few years as Numerous and various field projects has been trying to raise funds through an ICO. Both the popularity and success of ICOs are intriguing and more and more people are trying to dig deeper in this subject and explore the new opportunities of their financial lives.

ICO stands for “Initial Coin Offering” and it’s somewhat related to the well-known term Initial Public Offering — IPO. Initial public offering is the process by which a private company can go public by selling its’ stocks to general public so that these companies can raise equity capital with the help of an IPO. ICOs are similar to IPOs as it has already been said, ICOs are not designed to be a physical currency, or a currency that can be used with its’ general purpose. Actually it is a way to support, invest and help grow a project, start-up, small business or a specific app. In order to be fully ready to invest in ICO you will have to understand more about how it works, is it legal, what you are buying, etc. In general, you have to know the factors that influences one’s’ decision on making an investment in ICO.

Firstly you will need to Understand what you are buying in an ICO. Search for the sources on which you can learn more about ICOs. There are numerous platforms and blogs that provides you with enough information about current projects, current ICOs, their total market Caps, prices through the specific time sector put in to graph and in other helpful formats. You can search for TokenMarket, Smith+Crown, ICO alert, ICO Countdown, or other services that provide you with specific information.This is important so that you will Understand what you are buying in an ICO. Tokens that you are buying while investing in an ICO is nothing other than the analogue for the vouchers or other material documents confirming the ownership rights to a specific company asset when you are investing in an IPO. So you may have already realized that because of the similarity of ICO and IPO, the same principle goes for investing in ICO, but the true is that there is no Universal or a specific rule that applies on accepted mechanism of ICO. This means that not every company sell their tokens the same way others do. But, usually they sell the right of ownership to a specific part of company’s intellectual property.

Investing in a big ICO means following a bubble, you just have to make sure not to follow a bubble with a crowd. People tend to follow the saying “The Bigger the better”, this conception doesn’t refer to investing in ICO. People are usually driven by emotions, seeing that an ICO is reaching a big success they fear that they might miss out on something, resulting an impulse and irrational decision that might be regretted later.This makes Size of an ICO one of the most important factors to consider before investing. Albert Murphy, The Crypto Geek who made $2 Million in 2017 from ICOs, says that there is a “Golden Range” where projects can be ideal — not too small not too big. Statistically given, this size is somewhere in between $2M to $10M. By determining the perfect size of an ICO you are eliminating the risk factors of a coin failure and avoiding the regulatory issues that big projects carry.

Analyze the White Paper. There is no similar situation with cryptocurrencies, there are ICOs that are being sold differently, that carry different values, market caps, different projects, legal issues and documentations that are needed to buy them. But there is still something that every ICO has — a White Paper. First of all, a white paper is an informational document, issued by a company promote or highlight the features of a solution, product, or service, in this case a cryptocurrency. White papers are sales and marketing documents, used to attract or convince potential customers to learn more about a particular product, service, technology or methodology. It is designed to be used before sales, as a marketing tool and not as a user manual or other technical document, it only carries the informational value. Before investing in an ICO, it is crucial to not just go through the White Paper, but rather read and understand every important subject. For example, This web-page provides you with White Paper of almost every cryptocurrency, just type the name of the Coin (cryptocurrency) in the search bar and learn more about your prefered ICO.

One of the most important part of researching about your prefered ICO is Analyzing the Team that created the project. First of all, it is crucial to know the teams’ Reputation. Make sure that they have had successful projects in the past. Research about their achievements, you need to know if their projects have been successful and that they haven’t had dark times in the past. You need to be sure that they are Business oriented and experienced, otherwise investing in their project would be like paying for a dead horse. After this you need to know who their Partners are, besides this, you will also need the information about the leaders and the project team. This information usually is available on their web-pages. Most of the times these projects are startups and they are always open about their history, team and other subjects, if these information is not available — that’s your red Flag.

You need to feel like you are important in this Project. Investing in an ICO means that you are buying a certain part of this Company’s’ intellectual property. Professionals who often invest in IPOs know that they have a possibility to affect committee of directors or act as a co-owner of the project and Companies’ themselves are engaged with the community. The founders should be Accessible, for an ICO to be considered as a potentially good investment. It would be most wise of you to avoid the projects where everything is managed by community managers and you have to go through several steps and talk to a lot of people to get to speak with the founder or the CEO.

In this Article we went through the most crucial factors that should be considered before investing in ICO. A lot of people are interested in latest hype about the cryptocurrencies, they want to invest but do not have the proper knowledge or are afraid of making mistake. Generally preparation for investment requires multiple steps and research, you can never be too careful.In the Future ICOs will be widely established as a method for raising funds. There will be sufficient amount of projects to choose from, consequently assessing these projects will become even harder. The key is to explore, look into the details and read as much information as possible and realize all the positive and negative results that investing in ICO may carry.

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