ICO Markets
As a cryptocurrency investor, there are two primary markets in which you can make money:
- Exchange Markets, buying and selling cryptocurrencies.
- Primary Markets, or ICOs, buying tokens of cryptocurrencies before they launch.
In this post, I'll discuss the latter, i.e. ICO investing. ICOs are becoming increasingly common with many crypto projects. It shouldn't come as a surprise then that many crypto investors are flocking to this area of crypto investing.
Bull-Bear Markets
However, many investors fail to realize the inherent risks in ICO investing. This is problematic, especially at the current stage. This is because many investors have not yet seen a proper bear market in ICOs and new crypto investing.
Over the course of 2016, those who are new to cryptocurrencies, have only seen mostly positive results from ICO investing. It goes without saying that no market will remain a bull market. Bear markets in crypto are especially brutal, with 50% declines being the norm rather than the exception.
In light of the above, I urge crypto investors to be careful with the kinds of ICO investments that they make. Investors should only look for those investments that have a high probability of an upside, with protected downside.
Don't Follow the Hype
The quickest way to lose money is to blindly follow the hype and invest in the most popular ICOs. We are already seeing a slowdown of these types of tokens. Take SingularDTV for example. It was one of the most hyped ICOs of 2016 in my opinion, and raised $7.5 million in a matter of 10 minutes. That's a huge amount by any standards. But what happened after it started trading? It lost value, and today trades at below the ICO price. You could have gotten a better deal just waiting for the secondary markets instead of ICO.
Today, there are many such ICOs that are hyped. These will not necessarily return money to investors. Instead, we need to look at ICOs that are under-represented and not very well known to everyone. This way, when they gain value, you make money but not many people are joining already in the ICO.
A Look at ARK
Let's look at ARK as an example. It has an ICO that is ongoing at the moment. It is middle of the road - not too hyped, and not too unknown either. It will likely end up raising a little over $1 million or so. That's the ballpark that normal investors should aim for. If it is too obscure, you don't know the team and others don't trust it, and it might be very risky. If it is too high, the returns after the ICO will usually prove to be in adequate.
If ARK reaches the level of SingularDTV, then you're already likely getting 8-10x your investment. That's a pretty good return already by all measures. The point is, you should always look for higher upside and protected downside. The higher the upside potential, the lower your risk of investment. The downside is usually protected by other investors. ARK fits that narrative nicely.
Of course, the important thing to note is that the project actually has the upside potential. ARK checks off the boxes - it uses delegated proof of stake, so no mining inflation required. It has a professionally written whitepaper. It has a dedicated team that is already working with other projects like Lisk.
Then of course there are the unique values - Unique Value Propositions. For ARK, it is mainly the smart bridge technology that can connect different blockchains. If this succeeds as the designers envision, then it can be a gamechanger in crypto, and the you're talking about 25-50x instead of 10x. This is the upside potential that may or may not be realized, but you play your odds to the upside rather than the downside.