Guide to Investing in ICO During the Bubble
As we all prepare for the winding down of another year, and the start of a new one, we can’t help but notice that the end of 2017 hasn’t been short of compelling disclosures. The Bitcoin charts continue to climb and so does the vast oversupply of ICOs, along with a heightened awareness surrounding cryptocurrency. While the market is inherently booming, it is difficult to ignore the legal collapse of projects like Tezos along with murmurs of an inevitable “bubble”. Now more than ever, is the time for careful analysis and education before making investment decisions that could lead to significant losses. For this reason, you will want to read this article carefully before you invest in ICO.
ICOs, The Larger the Better – Fact or Fiction?
One of the most common misconceptions among investors today is that the larger the amount a project manages to raise, the higher probability for future profits when it enters into aftermarket trading. On the contrary, crowd-impulse tactics such as this can be the epitome of a poor investment decision you will later regret. Over-inflated projects tend to render over-inflated results, meaning little in the ways of profit or achievement for those who bought in, not to mention more red tape, regulatory challenges, higher risk factors, and a loss of project motivation in the face of such quick startup success. If you are thinking about getting involved in ICO, read these 6 rules for a potential winning investment.
Rule #1 Trade Over-Hyped Companies for Teams of Value.
When it comes finding the right ICO, there appears to be a “golden range” that investors should look for, where projects are not too large and not too small. This range has been statistically discovered to be between $2 million and $10 million. Remember that ICOs are startups in nature and a company’s initial funding only needs to be enough to deliver the project or proof of concept. When the project and team are good, $2 million to $10 million should be more than enough to start visibly achieving milestones. On other hand, $200 million in the hands of an incompetent team is not going to deliver much in the terms of project accomplishment or return.
Rule #2 Drop Teams that Don’t Have Signs of Success.
You’ve heard the phrase: “If you want to be successful, surround yourself with successful people.” The same holds true for an ICO investment. When you choose put your money into an experienced and successful investment community, you increase your chance of success by tenfold. If you can’t find any proof that your ICO actually owns a successful business or holds any recognizable achievements – give them the boot! Without the necessary verification, you could be throwing money at someone who has no idea how to even develop a business. The founders should be business oriented have a good reputation outside of the ICO, and have proven themselves with other projects before they are eligible for your investment.
Rule #3 Lookout for “Dark Periods”.
The entire concept of ICO is to launch a cryptocurrency that will not only be useful, but will be adopted throughout worldwide channels. Something like this is only possible with services that are disruptive, innovative, and hold immediate and high value towards users in the retail sector. This means that having to wait an entire year for an alpha version is unacceptable and should be considered a major red flag. Throughout the ICO you should be able to get a feeling of the service that will be provided and have the ability to spend your tokens immediately at the end of the campaign.
Rule #4 Ensure Reasonable Token Policies
As the market continues to introduce an abundance of ICOs, it is become more common for a project to come under their hardcap. This shouldn’t be taken as a negative sign unless the amount raised in over $2 million. (As mentioned previously, there isn’t a strong argument for a startup to request unreasonable amounts of funding.). It is important that the token holder destroy any tokens that remain unsold immediately following the finalization of tokensale. This ensures economy balance between the amount supplied and the corresponding market demand. Verify that there won’t be any releases of future offerings on the same token. This provides you with protection against oversupply, and gives the price of your tokens the potential to increase as much as 500 to 1000 percent within a year.
Rule #5 Verify Blockchain Worthiness and Disruptive Character
As we witness an enormous amount of companies releasing ICOs, it is apparent that some simply want to take a piece of the cake without an actual need for the use of blockchain technology. Before you decide where to invest your money, carefully read the whitepaper to ensure that blockchain is an absolutely static component of the project, and that it adds a competitive and unique advantage over others in the market. Companies that are creating an ICO simply for the purpose of creating an ICO should be a major red flag. Additionally, a disruptive nature is an absolute necessity. The project should not rely on marketing, but rather a focus on purposeful core values that lend easily to a viral following among retail users.
Rule #6 Founder Engagements with the Community
One of the greatest reasons to invest in a project of reasonable size is the founder accessibility it provides. The best projects we have invested in are ones in which founders and CEOs are readily available through their community channels. Be sure to avoid projects that are solely handled by community managers and require you to cross a lot of red tape just to speak with the CEO or founder. In most cases, these employees really don’t care about you or your money, which increases risk factors. Last but not least, founders should place their priorities in the growth of the business’ circulatory token demand and market share, rather than its profitability, so that their token continue to increase in value
Conclusion: The Ideal ICO Investment Criteria
•$2 million to $10 million in range
•Business oriented and successful founders, e.g. already established businesses, high achieving awards, etc.
•Unique service offering and direct token application following ICO
•True need for blockchain, along with a disruptive character
•Founder accessibility through community channels
•Priority in token growth rather than business profitability
Read more: 5 ICOs to moon in 2018