Investment Risk Assessment

Published in
3 min readMar 4, 2018

In a highly volatile market the ability to accurately assess investment risks becomes one of the life-skills. Therefore, today in the rubric #Cryptoeducation we will discuss the main methods and models of risk assessment in the ICO market.

To examine the ICO project you are interested in, you need to evaluate four T-components:

— Team. Evaluate the qualifications of team members, the reality of their linkages, the previous experience in a particular field, and successful entrepreneurial experience in general.

— Tech. The project should have a clear and well-developed Roadmap, or even better — a working prototype or a finished product. If you are technically skilled, it is also worthwhile to have a look at the project’s source code, which is generally available on Github, and the technical description in White Paper.

— Theme. The project should be a real pain killer and not just a “tribute to fashion.” Here you need to analyse the main competitors of the project, the size of its target audience, scalability and how challenging the goals are. And, of course, you need to answer the main question: is the blockchain really needed here? Or is it used just ’cause of the name?

— Token. Does the project have an asset allocation agreement? How are the tokens called in the basic documents and what legal nature do they have? What is the total number of tokens to be issued? Answers to these questions should at least not raise even more questions.

In addition to 4-T analysis, there is also an interesting concept of Alex Kontegna, a well-known business consultant in the field of blockchain. To assess the start-up, he suggested using the so-called ICO quality matrix, divided into 9 segments, depending on whether there is a finished product and internal currencies within the ecosystem.

Projects that fall into the orange zone become even less stable when attracting more funds and the investment risk increases proportionally. And vice versa, investments in blue zone projects become even more profitable with the funding growth. Those projects that fall into the negative zone on both axes are not worth investing in.

The ICO market with its huge potential and profits is very attractive both for beginners and experienced investors. Still, you should always remember that even the most thorough and detailed analysis can not guarantee a hundred percent success of the project. Therefore, you should always follow the golden rule of investing and risk only those sums that you are ready to lose — especially if you are just starting your dive into the crypto-world.

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