Factors to Keep in Mind When Investing in ICO — Know Why This is the Right Time for ICO Investment
Initial Coin Offerings (ICO’s) peaked in the market in 2017 when they raised funds worth several billions of dollars through different projects. Early investors made substantial gains. There were also reports of how some dubious investors cheated gullible investors affecting the credibility of this easy and efficient fundraising mechanism.
Due to the severe economic crisis caused by the global coronavirus pandemic, investment in ICO is seen as an effective hedging tool against a market downturn and inflation.
Despite extreme market volatility, digital currencies are generally high risk-reward investments offering more returns than other traditional assets like gold, real estate, and financial stocks. Bitcoin crossed the $41000 mark recently due to huge demand from institutional investors looking to diversify their portfolios.
Let Us Analyze More About How ICO’s Work, Their Advantages, Limitations, and the Future Expectations
What is an Initial Coin Offering?
- It offers digital tokens to prospective investors in the market.
- The tokens can be easily traded on the leading cryptocurrency exchanges or secondary markets.
- ICO’s have a certain purpose behind their launch and they will attempt to solve a certain problem.
- The holders of the tokens do not receive ownership rights but are financially backed by different real-world assets.
The Different Types of Initial Coin Offering Development
- Private ICO — Only a few investors can purchase the token in this process. This attracts participation from ultra-wealthy investors and professional traders who have accreditation. The securities are not publicly offered for sale.
- Public ICO — It is a well-organized crowdfunding campaign aimed at targeting retail investors. Any individual can become a participant in a public ICO by investing a minimum required amount.
The Process to Follow to Participate as an Investor in an ICO
- Purchase some Ethereum by getting it from well-known Cryptocurrency exchanges like Binance and Coinbase.
- Set up MyEtherwallet that helps to store your ETH holdings securely. It is an open-source platform safeguarded by robust smart contracts. It has facilities for sending and swapping Ethereum tokens, integration with DApps, and hardware wallets. Transaction fees of around 0.01 ETH will have to be paid for executing 2 or 3 transactions.
- Trust Wallet can also be used as it is mobile-compatible and highly user-friendly. It supports both ERC20 and ERC721 tokens.
- You will get a unique public address for your Ethereum-based wallet and the private key will be used for accessing the funds.
- Since there are so many ICO’s simultaneously being launched in the market, it is better to do some due diligence before putting money on them.
- The various ways to determine the feasibility of an ICO are to read their whitepapers, do a background check of their team members, and check for any investor feedback on social media platforms or online forums.
- Invest in ICO’s that have a solid product or at least a basic prototype in place.
- Know how the token will be used and its economic value.
- You can register on sites like ICO Drops, ICO Tracker, ICO List, ICORating, and ICO Alert that contain a comprehensive list of all current and upcoming ICO’s in the market.
- Once you have picked the ICO suiting your financial requirements and investment goals, undergo KYC/AML verification.
- Follow all the tax and anti-money laundering laws.
- Invest a limited amount at the start so that you can manage your finances even if you lose some money.
- Do not get tricked by scammers as funds once sent to false wallet addresses can never be recovered.
- Protect your funds using private keys and end-to-end data encryption.
- Once you have invested in an ICO, wait till the token gets listed on a top Cryptocurrency exchange. You can earn profits when the value of the tokens increase.
Some Factors That Indicate That an Initial Coin Offering Is a Scam
- If there is no detailed information about the founders or team members online, it shows a lack of transparency and the project is covering up some vital information.
- There is no active community support for the project. This points out a lack of interest from investors.
- Read the whitepaper deeply to know more about the technical roadmap of the project and the token distribution strategy.
- If the project does not require the use of blockchain technology, purchasing the token will not serve any purpose.
- Approach the token offering with an open mind as aggressive promotion will be going on to market the token.
The Best ICO’s to Invest in 2021
- PointPay — It is a project that aims to ensure a high level of security while executing transactions. PointPay is a UK fintech company that uses blockchain technology for performing its banking operations. It has also launched its own crypto exchange, crypto wallet, and payment system. Investors can purchase the ERC20 compliant token named PXP token. The ICO will be held on July 22, 2021.
- Nagaswap Protocol — It functions on the Binance Smart Chain (BSC). Nagaswap offers margin trading facilities for investors on synthetic assets, tokenization of Bitcoin (NagaBTC), and a decentralized stablecoin (NagaUSD). Users can trade in derivatives on the completely decentralized platform. It had one fundraising round in December 2020 but is still active now.
- Moonai — It is a decentralized exchange on the Ethereum blockchain network and uses the MetaMask wallet. Moonai is targeting entrepreneurs aiming to tokenize their real estate property and artwork. It offers 100,00,000 Moonai Coins (MOOI). The fundraising campaign started on January 17, 2021, and will go on till February 17, 2021.
ICO’s witnessed high growth 3 to 4 years ago. Now, the focus in ICO Development has shifted to maintaining sustainable returns, comply with the different regulations, and protect the rights of investors. Scams have swindled millions of dollars from investors and it is better to be cautious while investing in an Initial Coin Offering.
