Investing in a cryptocurrency is always a risk. However, it is offset by sometimes spectacular profit prospects. With ICO (initial coin offering), it’s the same concept: choose wisely, and you hit the jackpot, make a mistake, and you lose everything or almost. It is nevertheless possible to limit the risks by carefully selecting genuine ICOs. In this article, we offer some tips for choosing them.
1) The Hard Cap and the Number of Tokens
Before digging into an ICO, the first thing one should look at is the number of tokens that will go on sale, as well as the soft and hard cap (i.e., the minimum and maximum amount of funds that the cryptocurrency issuer wants up). The soft cap is the minimum amount a project must raise during its ICO to be “valid”. In theory, if the soft cap is not reached, the project does not have enough money to carry out the project. If the Soft cap is not reached, as a priority, the ICO is cancelled. It is, however, a decision that belongs to the founders, who can, therefore, decide to continue their project, despite a soft cap not reached.
This allows you to evaluate the market value of the cryptocurrency once the ICO concludes, and see how it ranks in the ranking of CoinMarketCap.
2) The Whitepaper and the Site
Before you rush into buying a cryptocurrency in presale because it promises wonders, you will have to do your research. No problem if you use ICO opinion sites, but do not take their opinion for cash (either for good or bad). Likewise for the forums, which are full of trolls and professional influencers. You will, therefore, have to read carefully the ICO’s website in question, and especially its white paper.
Although, marketing is an essential factor in the success of any commercial project. We want to cite an example to our readers here. For example, If you read a white paper that promised to commit with the money raised during the ICO a great artist, Rihanna for instance, to give a private concert on the platform. Please be prudent enough to proceed.
That said, a highly marketing-oriented ICO can be a winning horse given the specifics of the cryptocurrency market. But it will often be short-term bets. How to know when the end of the “pump” will take place? We advise you to watch when the tokens reserved for the founders and the team will be released (this is in principle indicated in the white paper).
3) The Concrete Potential of the ICO idea
Many ICOs are based on a proposal whose scope is far too limited, or uncertain, to justify an investment on your part. Before you commit, also check if the cryptocurrency you are considering buying will face competition. The more a token targets a new and large market, the more likely it is to win, and therefore to see its value increase. Of course, a little competition in a huge market (energy, for example) is not a problem. The ideal is still to find the first entrants. For example, If you bought the INS ICO, which offers a platform for selling products from the manufacturer (from the multinational to the small business) to the consumer. This is a significant market on which no cryptocurrency is currently present.
4) The Team Behind the Idea
Even the best idea in the world will come to nothing if there is not a competent team to wear it. The ICO website should provide the list of team members, which should cover all areas required to complete the project (technical, operational, communication, marketing, etc.). If there are 3 or 4 people behind the project, you should give up right away. Consultants from successful projects are also a guarantee of security (but not certainty). Do not hesitate to do some research on Google about the CEO and other significant members of the team. We sometimes learn exciting things.
5) A Business in Place
The principle of the ICO is to start an idea, so there must not necessarily be a structure in place that has proven itself. But from our point of view, it’s a very convincing criterion. This confirms that there is already a market, that the team knows it and that it already has customers and partners. For example, If you participated in the ICO of Energi Token, a UK energy company that already generates half a million dollars in revenue by managing electricity contracts worth $ 150 million. A concrete project, seasoned professionals, a market that exists, customers all with a reasonable hard cap of 15 million, ETK meets almost all your criteria.
6) The Code on Github
In principle, the cryptocurrency code is open source and published on Github. People with programming skills will be able to take a look. If you do not know anything about it, you can still check the activity on the code, regarding updates and the number of people working on the project. Do some base level research, and you will know what they are talking there. If you want complete tech details, you can always approach people in the ICO space who are more than willing to help you.
We can do our investigative work in a very reliable way; the fact remains that participating in an ICO is risky. We are nevertheless convinced that by following the above tips, you will make more winning bets than flops. Please note, however, that we cited some of the ICOs where users participated in above to illustrate. It is not about any investment advice.