This guide is an introduction to ICO investing and the steps to look out for when investing in an ICO.
According to Coin Schedule, the proliferation of ICOs has exploded. In 2016, there were 46 ICOs that raised $96.3 million. The largest investment was secured by blockchain company Waves, which raises $16.4 million investment.
Through November of 2017 the total number of ICOs has risen fivefold to 228. And the total amount of capital raised has leapt to $3.6 billion. This includes one of the most successful ICOs, which was launched by Filecoin, garnering the software company $206 million
And there’s reason to believe those ICOs launched recently will be successful. Status.im, a browsing and messaging application, raised $100 million in under three hours. Another browser startup, called Brave, raised $35 million in under 30 seconds.
Total Capital Raised from ICOs in the first 7 months of 2017
What is an ICO?
An Initial Coin Offering, also commonly referred to as an ICO, is a fundraising mechanism in which new projects sell their underlying crypto tokens in exchange for bitcoin and ether. It’s somewhat similar to an Initial Public Offering (IPO) in which investors purchase shares of a company.
Why ICO's
Democratization: Allow projects to circumvent the traditional method of asking Banks/Venture Capitalists that may take a lot of time and resources. Anyone can invest and can earn the possibly huge returns just like how the big boys are accustomed to.
Immense Profit Potential: Many in the space want to invest in the “next Bitcoin”, potentially riding the wave of buying coins at pennies on the dollar and selling them later at an astronomical valuation. Most ICOs have only a conceptual white paper with little to no proof of concept, thereby validating a high payoff potential due to the extremely high-risk investors are taking. Just look at the returns if you were to invest in the ICOs below:
How to invest in ICO's
It is absolutely essential that you have your own wallets. Your exchange account (e.g. Poloniex/Bittrex/Kraken) DOES NOT COUNT as your own wallets, as you do not control their private keys. Participating in an ICO requires you to send BTC, ETH or NEO from your personal, private wallets. If you send it from an exchange, you WILL NOT get the ICO tokens since the transfer originates from the wallet of the exchange and technically you do not own any wallets in an exchange.
We would recommend using Ether as the base cryptocurrency as many ICO coins are compliant with the Ethereum standard called ERC 20, and the most convenient wallet is MyEtherWallet (MEW).
Go to MyEtherWallet. You will land on the New Wallet page. Follow the steps, and save your passwords, keys and wallet files (UTC/JSON). Then you're ready to go, after you transfer some Ethereum to this new wallet of yours.
More often than not, ICOs will provide a step-by-step guide to participating in their ICOs. You should join their official communication channels such as Slack or Telegram to receive the latest updates and ask questions directly to the developing team. Here’s an example of an ICO guide:
Exchanges to trade ICO tokens
If you believe in the tech, then hold the coins for the medium to long-term, or until your price target is hit (e.g. 2x, 3x, 10x of capital). If you just want to flip it, then sell it once it reaches an exchange that usually lists an ICO. Alternatively, if you’ve missed out on the ICO, you can buy it at an exchange. Here is the list of common exchanges that have a tendency to list ICO coins:
Ether Delta: A decentralized exchange that is usually the first exchange to list newly issued ICO coins. It can be extremely complicated for beginners to trade here, and it is not recommended to do so.
Bittrex: The biggest cryptocurrency exchange by volume that only accepts coin deposits (Does not accept fiat money). This is the “big league” that every ICO wants to be listed on.
Poloniex: The second biggest cryptocurrency exchange by volume that only accepts coin deposits. This is also one of the exchanges that all ICOs want to be listed on, but the criteria to be listed on Poloniex can be extremely tough as only a few coins are recently added.
Binance: A China-based exchange that has gained tremendous traction, being the 10th largest exchange by volume in just a span of 4 months! It also lists new coins based on consumer demands.
Kucoin: Kucoin is a multi-cryptocurrency exchange with Service Centers based in China. Kucoin offers trading pairs such as BTC/BCH, BTC/DASH, BTC/NEO, BTC/ETH, BTC/RDN, BTC/LTC, BTC/CVC, BTC/KCS, BTC/RPX, etc. It also provides users with a mobile app available for iOS and Android. This is the go to exchange for current ICO's.