Investing in altcoins can be difficult. Because the altcoin market is relatively new, there are fewer research options available than there are with the traditional commodity markets. This fact might make it challenging to properly weigh whether an ICO is a safe investment or whether you should run for your life.
This article details how to properly vet an ICO. It also points out key considerations an investor should keep in mind and tips on how to avoid pitfalls in ICO investing.
Important Points to Consider
Bitcoin Market Journal regularly evaluates new ICOs. The first level of examination surrounds what can be called the "Three Ps"
- Product: Does the ICO represent a working prototype or simply a plan? While it is important to read the whitepaper to determine if the ICO's vision is viable, an ICO that has a valid proof-of-concept is more likely to succeed than an ICO that is just an idea. While it is relatively simple to create ICO buzz (After all, you can pay to have positive mentions posted on the ICO forums and the like!), it is unlikely that this buzz could last past the ICO phase without proof that the ICO can deliver on its promises. Without sustained demand, a coin is unlikely to be listed on the coin market.
- People: How good is the ICO's team? As is the case with ICO buzz, advisors and experts can be bought to add name recognition to a team. It is important that you can see through this when evaluating the strength of the ICO's leadership, development, and advisory teams. It is vital to be vigorous about vetting the credentials of the personnel of the ICO you are considering, including looking at subject matter expertise, verifiable projects, work history, as well as whether they are associated with an expert or advisor placement firm. Also, look for holes in the team; do they have the expertise to actually do the job they have promised to do?
- PR: How strong is the buzz the project is receiving? While some buzz can be bought, buzz can also originate organically. How many news outlets and user forums are talking about this ICO? Can these posts be traced back to a few "seed" posts? How balanced is the review; is it difficult to find negative or neutral comments about a project? You want to invest in a project that has strong buzz, but if it seems too good to be true, it probably is.
Once the ICO passes this original "sniff test" it is time to look deeper.
Digging Deeper into the ICO
Bitcoin Market Journal analysts ask the following questions about ICOs they consider, and so should you:
- Do you understand the ICO's concept and is it spelled out in plain English? Bad grammar, misspellings, and other errors that could be caught with basic proofreading matter here, as they show the management team's attention to detail.
- Does this ICO solve a pressing problem? If the ICO is to survive, it must offer a solution that is really needed.
- Is this token the best way to solve this problem?
- Is the ICO's potential strong enough?
- Is the ICO's price based on its current value or on future expectations?
Finally, you should ask a few additional practical questions:
- Is it clear when the ICO will begin and end?
- How many tokens will the owners keep?
- Is the token supply fixed or can new tokens be created, devaluing your investment?
- Are there "early bird" bonuses? Are you eligible for them?
- Is the ICO only available to accredited investors?
- Can you easily contact someone associated with the project if you have questions?
- How easy is it to buy the tokens? Have the ICO's details been clearly defined?
Choosing an ICO investment is not a simple matter. However, by arming yourself with as much information as possible, you can feel better about your final decision. If you have any doubts about the viability of an ICO or its management, it is better to pass on it. However, if you thoroughly vet any potential opportunities and ask the questions laid out above, you will have a better chance of avoiding a lemon.
To start your search for the right ICO investment, click here for our complete list of Upcoming ICOs!