6 Tips to Invest in an ICO
An Initial Coin Offering, or ICO, is a crowd-funding venture conducted by cryptocurrency startups. It aims to raise funds for a certain project or service by selling tokens, or digital shares assigned to the startup. Fundraising through ICOs allows companies to bypass time-consuming and legally required financing processes due to a lack of regulatory framework. This creates an opportunity for unique projects, businesses, and ideas to get a boost through financing. This creates great opportunities for profitable investments. With assistance from this article, readers should be able to invest in an ICO and earn a profit.
ICOs Are Growing Worldwide
With ICOs taking off around the world, they have proven to be appealing investments. In fact, they’ve grown so much that Forbes recently wrote about their “meteoric rise.” With the right ICO, you can make a sizable profit. Take Tezos, an ICO that raised over a whopping US$232 million toward its goal of creating a new self-amending cryptocurrency ledger. Successful projects like Tezos can provide a great opportunity for investors who seek to gain a large return on their initial capital donation.
1 — How to Find ICOs
Before you can even invest in an ICO, you must first find one. At the moment, there are dozens if not hundreds of ICOs to invest in, making selecting just one or two a real challenge. As ICOs grow, however, services are also arising to rate them and help you evaluate which ones are worth your interest. ICOrating and TokenData are both current leaders in this respect and worth checking before investing. Both of these websites are updated regularly to deliver the latest information.
2 — Research the Company Behind the ICO
Once you find an ICO that you are interested in, it’s vital to do some research pertaining to the business endeavor, project, or idea that the people behind the ICO are attempting to pursue. Check the ICO’s website and read its whitepaper. The whitepaper is a document that contains the ICO’s business plan, strategy, team, innovations, timeline, and token/fundraising information. It essentially gives you all the pertinent information related to the ICO and company itself.
Go online to check out the project’s social media pages on popular platforms, like Facebook, Slack, LinkedIn, and Reddit. Ask relevant people on these platforms, or even the team members themselves, questions pertaining to the ICO. Consider it a sign to move on if an ICO doesn’t have a strong social presence or talks more about raising money than about its product, service, or endeavor.
If you feel confident in your programming or tech skills and the ICO’s programming code is open source, you could do some research on platforms like GitHub, where the ICO’s code should be available. This will allow you to understand how the project is coming along and what progress is being made.
3 — Research the Team Members
By reading the whitepaper, analyzing the website, and digging around on social media pages, you should have been able to figure out who the team members behind the ICO are. Follow due diligence on the members and check out their past achievements. Have they started any successful business ventures? No team members should raise any suspicions when you research them on Facebook, LinkedIn, or other pages. Consider a serious lack of information on a person to be a warning sign.
Pay attention to how long the team members have been working together on this project and past projects, as well. The project team should also be able to clearly express the purpose and goal of the project. The developers behind the ICO should be transparent. The team behind a project is crucial to the overall success. Consider a poorly put-together team a bad sign for an investment.
4 — Understand the Structure
Every ICO is pretty much carried out the same way. A team announces the interest to pursue a project, social media interest is acquired, a business plan is released, advisors hop on board, tokens are made, everything launches at a set date, funds are acquired, and work is done. Each of these specific phases or tiers should be described in the project’s whitepaper, which will also feature a general timeline.
Once you have taken a look at the ICO’s website, social media pages, and whitepaper, you should have a thorough understanding of the roadmap and timeline behind the project. This will allow you to keep a close eye on the ICO’s public following and how much hard capital is being raised as things move along. Assessing how much capital has already been raised toward goals is also very important since positive growth demonstrates public interest and trust.
5 — Returns for Your Investment
IPOs and ICOs raise capital in similar ways. Even so, it is easier for ICOs as they are not yet formally regulated. When investing in an IPO, you get shares, while with ICOs, you get tokens. Think of these as digital shares made through blockchain technology. Tokens are usually acquired when an ICO launches, by sending bitcoin or Ethereum cryptocurrencies to the project wallet. In return for your cryptocurrencies, you get tokens.
There are generally two types of tokens; these are usage tokens and work tokens. Usage tokens essentially function as a medium of exchange in the ICO’s platform. They are usually exchangeable for other cryptocurrencies or fiats, such as pounds, euros, or dollars. Work tokens grant an investor power and say in regards to an ICO’s direction or future development. An investor’s influence is proportional to the number of tokens held, and decisions are carried out by a voting system.
Most ICOs release a limited number of tokens. A token cap increases the appeal of an ICO and drives up the token price post launch. When considering investing in an ICO, it’s important to understand whether you can gain any benefits from becoming a token holder. Will you receive dividends? How will the ICO use the funds? Will the tokens be useful to you? What are your potential returns on being a token holder?
6 — ICOs Worth Investing In
Astronaut, for example, is currently in presale. It is a professionally managed ICO token designed to take the guesswork out of investing in ICOs. Another project currently in its ICO phase is DomRaider. This French project specializes in drop-catching, meaning reserving new domain names before selling them in auctions. One other ICO to closely follow is Tokenstars, the first platform to tokenize people! If you have any ICO recommendations, I would love to hear from you!
It’s crucial to do a lot of research on your ICO of interest before investing. Keep in mind that the cryptocurrency industry is not very regulated. Since some ICO code is open sourced, it is possible that thieves may steal it and create a copy ICO, confuse investors, and steal funds. Scammers are out there, and that’s an extra reason as to why you need to do thorough research. The ICO market is new; therefore, if you’re in for the long-run investment, don’t be surprised if your token value fluctuates dramatically from time to time. A great tip is to find an ICO that you like that is providing a unique solution to something. These types of ICOs will most likely get a lot of support, providing great dividends in return.
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