ICOs – A Two-Sided Medal
There are several new projects that decide to make crowd-sales in which they offer investors early opportunities to purchase a share of projects that includes tokens/coins at a (probably) good price for the particular Altcoin tokens. You wonder about that “probably”? Well, it is not uncommon to see an ICO token below the ICO price, once it hit the exchanges. Legit ICOs can give you a nice return, but these are hard to find in a shark tank full of scammers.
Why should I invest in an ICO?
Now, that you've heard the dissapointing fact that many ICOs will be available below the ICO price after its launch, you probably ask yourself why you should take the risk to invest in an ICO. Generally, the motivation of investors is the token will get traded from Day 1 on the crypto-currency exchanges and will earn a big profit to ICO investors. During recent past years, there’s been several ICOs that have achieved major success. That includes projects in general and the revenue investors earned. Coins doubled/tripled their value and a lot more in compared to the value on the ICO. In fact, there’s even examples of investors earning a sky-high 1,000% from their investments – no joke. This has increased the public interest in this crowdfunding model and wherever there is an demand, the supply will come. However, the supply is often not the best.
So what’s going on and are these extreme results the real deal? We can't stress enough, that to keep in mind not all of the projects earn profits for investors. It turned out that many of the ICOs were in fact total scams in the way they were traded while some of the projects left with money and they went AWOL since then. This is a warning flag to watch out for ICOs before making investments. They all sound like they are going to be the next big thing, but after a short glance at the fact you can weed out the most.
Example A: Tokenpay. They want to develop the “World's Most Secure Coin”. Ok. How the f*ck do you want to achieve this big goal with just two developers in the team? Do they sleep? If yes, they will take forever to achieve this.
Example B: Finom. They are building a blockchain ecosystem, containing many several parts that make sense. They have a dev team of 15 people. That is a team you can achieve such high goals.
The key is to know how to make wise ICO investments and use your common sense. Keep in mind the process isn’t an exact science. It’s key to watch the project’s amount of seriousness and the team. View a project’s website to help determine the quality of the ICO. What is the team that launched the project? You should also watch the Bitcointalk thread and whether or not it even exists. You should also watch how the team members deal with technical questions. In addition, is a big community supporting the project? Don't get blended by all those fancy ads. In fact think economically: If you see excessive ads for an ICO all over the place, are they really working responsible with their funds? Sure a good portion must be used for marketing – especially in the field of ICOs. But blasting out 5 to 6 figures just for banner and retargeting campaigns is nuts. Yes, maybe they might reach their hardcap goals faster, but wouldn't a part of the money be better spent in the development of an actual MVP, prospects can test out before investing?
Highly marketed ICOs often don't give a damn one about transparence and communication. We would prefer an underdog ICO with an active Telegram channel, where you can chat with the CEO over any overmarketed ICO. If you do your research about the ICO you are going to invest, keep in mind that mostly all the resource you come across are bought or at least incentivized. In some cases really nothing is legit, so take every online resource, every Cointelegraph post, every Youtube video with a grain of salt.
You should observe the number of funds that are raised. A project that’s raised a small amount probably won’t be able to develop as time passes. Meanwhile, a project that’s raised a big amount a big number of investors won’t be left to purchase coins on crypto-currency exchanges. The most important process is risk management. It’s important not to put all your capital in one basket and don’t’ invest a big percentage of your portfolio in just one ICO.
What are the benefits of an ICO?
Ok now you heard enough of our fearmongering, let's get to the bright side of ICOs. One of the big issues when investing in crypto-currencies is what kinds of investments you should make. Legit ICOs are an excellent option and here are some of the top benefits.
Why do Entrepreneurs use ICOs?
One of the top benefits of ICOs is it’s an excellent option for raising capital efficiently. This is definitely one of the key benefits for ICO founders. There are also fewer documents required than with IPOs. This can save you a lot of time and effort if you’re founding an ICO, which is always a plus. Another major benefit is the price tag of ICOs is much lower than IPOs. This makes it easier to launch an ICO, which can free up more funds for your investments. There are also opportunities for branding and marketing in order to get the word out about an Altcoin. If you get on board early you can also enjoy many benefits compared to taking that step later.
Another benefit is Altcoins sold the issue of fair distribution in ICOs. In the case of PoS, the coins earn revenue for the founder immediately. This is critical because it means you won’t have to wait forever to get a return on investments. That’s certainly a situation you’ll want to avoid as it can have a negative effect on your profits.
How about borrowing? This is an alternative to ICOs and has several implications on the cash flow of projects. This can’t always be managed via Altcoin projects. So it’s certainly an issue to consider.
Which benefits can ICO Investors expect?
There are several benefits of ICOs for investors. One example is early investors will get more liquidity in the early-stage companies. This is an important issue to consider and definitely a plus to consider.
Another benefit for investors is there’s no government regulation or registration. In a sense, this can provide drawbacks in terms of watchdogs. Meanwhile, it can also provide benefits since you’ll have to deal with less paperwork when investing in ICOs.
There’s some transparency. For instance, escrows could be used to check how funds are spent following the ICO. This is important so you’ll know where your money is going. That’s not always possible and can cause various issues. While the ICO you can monitor the Wallet address to get a feeling for the success and growth of the project.
There’s also early access to coins, which can provide the ability to grow capital. This is obviously one of the top goals of any crypto investment. It’s helpful if you get an early start on an ICO in order to reap the most benefits. If you do that you’ll have a head start over others who invest later. If you have been into the Electroneum ICO you might have been lucky. The coins were issued but the wallets not accessible. At the same time it got listed on Cryptopia early, and miners have been able to sell their mined coins at insane prices. After some trouble with the wallet release the investors have been able to sell their coins – despite a huge drop – with fat profits. We didn't like that ICO, but they handled the release of the tradable coins very good to avoid a dramatic flashcrash.
Yet another benefit for investors is being part of a community. This provides various benefits. For example, there’s a large group for getting support, which is critical in order to help you make the best decisions when making ICO trades. If you are active on Discord or Telegram you will maybe lucky to get some information as first, so you can increase your position before the actual news is out.
You’ll also likely be the altcoin’s first user. This unlike holding various company stocks. In fact, altcoins can be more tangible than other kinds of investments. It’s ironic that holders of traditional stocks often buy products they’ve never used before. This results in bigger risk since you don’t truly know what you’re spending money on.
At the end of the day, it is all about you doing your research. Forget about the webpages and youtube videos you might find. They are mostly bought / incentivized with free tokens. Dive into the goals of the company, understand what they are going to disrupt. Check the team and the total supply of the coins (the less, the better – bad example: CVC. Good example: HALO). Last but not least, you should check yourself upfront, if you have the patience for an ICO. It can take long until the token gets listed, it can also take long until it is profitable to sell – Can you hodl?