Dangerous ICOs: Red Flags to check

“Most ICOs will fail — they are either a fraud or disturbingly unprofessional.” You have probably heard this more times than you can remember — although probably less often than “Bitcoin is a Ponzi.”

This notion has been around since the last summer at least. Needless to say, it is still here: there were 90 ICO projects last month — probably more than in June, July, and August combined. Still, it seems like the average quality of the project has not improved. Any doubts one may have about the ICO market are understandable. It is indeed a dangerous and risky place.In this article, we will try to explain how NOT to pick a scam or an honest but ridiculous project:

What are the Red Flags that indicate that there might be something wrong with the project?

Anonymous team or they can’t prove their alleged identity
When participating in real-world investment projects, no one will normally give their funds to unknown people. In the world of cryptocurrencies, this is different, and people can actually send sufficient money to people they know absolutely nothing about it. A recent example is the Confido case. Orchestrators of this exit scam just stole someone else’s photos, created fake profiles on LinkedIn, and managed to complete a pre-sale and two rounds of ICO!

No restrictions whatsoever — anyone is welcome
What’s wrong with a project’s desire to raise as much and as soon as possible? Well, that’s what’s wrong:

• Money is not always an asset. In case of fundraising, it can be a liability. Usually, most ICO projects don’t regard their participants as investors (and for a good reason — legally, they are not). However, they still use the participants’ money for the sake of their project. Since the participants get tokens for their participation, they can sell them on exchange anytime they want — especially when someone feels that the projects don’t meet the expectations they put into initially. Major dump of tokens doesn’t help token exchange rate — and this is the most popular metric of the project success. Now, who is more likely to dump the tokens of a legitimate project — a serious and responsible person, who became a part of the ICO only after a thorough examination of the project and realising that the project is worth their money; or someone who doesn’t care about money at all and is here only to do a flip at the first opportunity of X2/prone to the most primitive form of FUD? The answer is obvious.
• It is a common practice to exclude residents of some countries (e.g., the US) from participation due to legal risks associated with regulations in those countries. Some projects decide to accept every participant — this may mean that the team doesn’t care about possible consequences in the future at all.

“Promise” or even a “guarantee” of ROI
Given the extreme volatility and degree of uncertainty on the cryptomarket, no one can be sure about anything in the mid-term and long-term perspective. Therefore, projects promising returns (sometimes even giving the expected ROI rate) seem to be dangerously naive — or deceitful. In either case, it is dangerous to trust them with your money.

Unrealistic ambitions
It is a common problem for traditional startups as well — in many cases, it is not enough to build just a working business, it must be a significant breakthrough, something that will change the world. But do we really need a revolution everywhere? And can any project bring it? It seems that in many cases projects seem to overestimate their capabilities. Can a small team of 2 developers actually create a whole new time of blockchain, which will be better than all the existing ones? Theoretically — yes. In reality, we need to stay realistic and carefully evaluate if the project can really fulfill its promises.
Crypto-sphere and especially ICO field is a dangerous field, and as we stated at the beginning of the article, reasonable distrust is understandable. Be sure to check that the ICO you are going to participate in doesn’t have mentioned red flags. There are a lot of great projects here — sometimes it’s hard to find them, but this is indeed possible.

Find out more about BitRewards and our Token Launch at our site BitRewards.Network

Join us on Telegram: t.me/BitRewards

Follow us on Facebook and Twitter for the latest news and developments.