The first rule to take to heart when investing in ICO's is to not invest in 99% of them. This sounds like harsh but the reality is ICO's(Initial Coin Offerings) are extremely risky and the vast majority are actually scams. This is why a high level of scrutiny should be conducted on a potential ICO you are considering investing in. This even applies to any ICO's that I mention in my articles also, no exceptions. It's important to separate the wheat from the chaff when it comes to ICO's and there's a lot of chaff! Let's get to it, here are 3 potential red flags that could make an ICO a disaster for investors and 3 green lights that might make an ICO a winner!
Here Are The 3 Red Flags:
- Beware Of Fake News
Does an ICO sound too good to be true? Lot's of promises from a team of people hiding in the shadows with pseudonyms for names? Don't fall for the hype! It takes a keen eye to spot the fakes in the ICO world. Even experienced investors get completely fooled by some of these shiny new ICO's. Make sure the founders of the ICO have skin in the game, that means money and their personal reputations on the line. Verify what they are claiming as best as possible. Look for lies, trust me there are many people involved in ICO's that have done nothing more than lie their way into investor pocketbooks. If they say an agreement has been made with a certain billion dollar company and the ICO you're interested in, it's your due diligence to make sure it's true if you're considering investing. Make sure to read and Copyscape that whitepaper. Call the ICO's organization if possible. Get a handle on where they are located and verify their address as a legitimate base of operations and not a fictitious front. Look into how long their domain is registered for, 6 months to a year shows a lack of investment in their own endeavor! And always be wary of the hype!
- If It's Expensive Don't Buy It!
Most ICO's have become way overpriced. It's not an investors job to establish a token's future value by paying for it up front! It's the job of the company to demonstrate that value AFTER the ICO's launch to investors, thereby providing value to everyone especially the investors who initially supported the venture. There are tokens that are going for $1-$4 dollars regardless of the token supply being low or not this is in my opinion highway robbery and a huge red flag for an ICO. Also, keep in mind you may not have gotten the best deal possible in an ICO. There are Pre-sales and Pre-Pre Sales for ICO's. If you didn't get the best deal you're already at a possible disadvantage. Personally, any ICO that is selling their tokens at anything close to a dollar each I consider highly suspect. Always buy ICO's on the low low!
- Potential Pump And Dump Coin!
Most of these ICO's should be renamed IPPD's, "Initial Pump and Dumps" because as soon as they hit the exchange that's exactly what happens. This now happens almost by default and few ICO's manage to recover and soar to the top in the aftermath. Careful research into the ICO of your choice is the strongest safeguard against this type of threat. In some cases you can predict a Pump and Dump and profit substantially but in my opinion you want to focus on the real winners that will blow right past this stage emering from the ashes like a phoenix of the cryptos!
Here Are 3 Potential Green Lights:
- It Serves A Purpose That Is Critical
To truly hit a home run in the ICO space, it needs to be a home run! A ICO truly worthy of investment should be a breakthrough technology that serves a vital purpose, conquering a problem that plagues a vast majority of individuals and paves the way for a shiny, brand new digital future, ie Ethereum, Bitcoin, Monero etc. What need does it serve? Is it merely an "interesting concept" or "kinda neat'? This should be one of the key factors one should focus on. Naturally these are far and few between. To paint a broader stroke a potential ICO needs to serve a want in an original way that you can identify with at least on a personal level. If you can't explain what an ICO does for a market thats original in a short pithy sentence it's probably not all that useful, a copy cat or two complicated and irrelevant for mass adoption.
- ICO's Must Serve A Large Market
Real winners serve everybody, an ICO must have a large market that it caters to. If it is too niche in its focus how can mass adoption ever take place? How can your profits increase if no one buys into the coin?
- Transparency Is Key
Both transparency and visibility is key for an ICO's success. There needs to be a solid team that is visible to public scrutiny, your scrutiny. It's important to know the intricacies of the project as best as possible to make the best investment decision. Secrets about the ICO only hurt the investor NOT the ICO's team. The blockchain must be visible to scrutiny, alone with the initial capital investments made before the ICO takes place. The team should have skin in the game as well! Is the ICO part of a parent company? Is one of the team members or the founder an angel investor with large capital of his own? Are these individuals involved legitimate, professional, talented and financially responsible? Without transparency what might you not know that could hurt you? Also high visibility(marketing) or "hype" is important to the success of the venture. People need to be excited about the project. These are further signs of a good investment.
With these 6 things in mind provided they pass each of these tests you have a potential candidate for a worthy ICO investment. But take these 6 aspects as the initial phase of your own research! Refining ones own system of gathering information is necessary to be considered a sound investor.
Here's a good video by Cedric Dahl who's very experienced on the subject:
Also, guys if you need more tips and just don't know how to get into crypto investing and haven't read my first post be sure to read it 10 Steps To Invest In Crypto Like A Boss
Stay tuned for more Crypto News, Crypto Guides and My Crypto Picks!