Altcoins or crypto-currencies are fast emerging as top investment options worldwide. The phenomenon is not restricted to investors in wealthy, developed countries. Instead, we have laypersons worldwide wanting to make a quick buck on a relatively lesser known investment avenue or merely to stash away extra money.
Prices of significant crypto-currencies including Bitcoin (BTC) and Ethereum (ETH) can deter any ardent, wealthy investors. But with crypto-currencies gaining unprecedented popularity, there is no shortage of Initial Coin Offerings or ICOs of new alt coins or crypto-currencies. The internet is full of ICO lists to help you find the best ICO for you to invest in.
Indeed, ICOs can be very alluring: they facilitate buying a crypto-currency at very low rates, similar to an Initial Public Offering (IPO) peculiar to stock markets. But crypto-currency rates tend to surge rather quickly since they are issued in limited numbers. So, if you are genuinely interested in entering the crypto-currencies trade, here are five things you must consider before investing in an ICO.
The first element to consider before invest is the ICO whitepaper. A white paper can be rightly called as a prospectus of the altcoin that is on offer. Generally, the whitepaper will carry every single detail that any investor would ask or require before putting money on a crypto-currency. The whitepaper outlines the objectives of the new crypto-currency and how it plans to achieve those.
Further, whitepaper of a right crypto-currency will also provide details about the numbers of coins that would be launched in the first phase, distribution patterns, anticipated markets and popularity as well as a total number of tokens that would be generated over a fixed period of years.
Studying the whitepaper of an ICO intimately will reveal whether the crypto-currency on offer is a mere copycat of those already existing on the market or does it have something new and innovative. Unfortunately, lots of ICOs tend to be copycats of successful ones. But good ICOs will distinguish themselves regarding target audience, uses of the crypto-currency and marketing strategies. These will be evident on the whitepaper.
Key Team Members
Before investing in any ICO, take time to study who is behind the new altcoin. Such information should generally be available online, through the website of the promoters. Knowing the core team is extremely important. Unless team members have adequate experience in managing an ICO and related affairs of an altcoin once it enters the market- it is destined for doom.
A random search on the Internet reveals, over 1,000 crypto-currency projects have failed during the first six months of 2018 alone. Over 50 per cent of alt coins introduced in 2017 were non-starters or collapsed shortly after their ICOs. By any standards, this is an alarmingly high number.
Of course, there are several reasons for these failures. But one was inept or inexperienced core teams behind the ICO. Nowadays it is relatively easy to launch an ICO offering esoteric crypto-currencies for a song. Since an ICO works on crowdsourcing, lot many startup entrepreneurs rush to start crypto-currencies. As reports indicate, most flounder and fail, leaving investors in the lurch.
A classic example is One Coin. The ICO attracted thousands of investors worldwide. However, the crypto-currency was proved to be nothing more than a scam. At least one core team member had made false claims about experience, qualifications and other vital details.
The best way to find about a core team is by studying their profiles. Look for these profiles online and especially on LinkedIn and social media. You may also come across some information about their educational qualifications and past performances. Sound knowledge of the core team should give you a fair idea of who is behind the new altcoin and what you can expect.
Every crypto-currency will be traded over the blockchain. The question now is, what enhancements are on offer with the crypto-currency being promoted with an ICO. A good team will have commenced developing a technology that would facilitate trading and long-term feasibility of the crypto-currency on offer.
If one goes by the history of various crypto-currencies, those fetching a higher price or in higher demand are altcoins that are faster to trade on a blockchain, offer very top or near the complete level of anonymity and are hack-proof.
Technological concerns should also include the availability of a new crypto-currency through physical or brick-and-mortar exchanges. The higher the number of transactions- physical or online- willing to trade in the currency, better would be its technology and acceptance.
Nowadays, lots of retailers and service providers are accepting crypto-currencies as tender for purchases. A good ICO should provide details about how the crypto-currency on offer will make it easier for e-commerce and purchases rather than merely an investment.
Token Issue & Holdings
Before considering investments in an ICO, delve into details about how many tokens you get as a participant. The pre-launch price should be desirable to make it worth your investment. Also, study competitors to know how much would the crypto-currency fetch once it enters the market or in the secondary market.
Generally, the core team will try and hold as many tokens as possible post-ICO. This can imply, they are confident about the new altcoin being successful. Simultaneously, you will have to look for the marketing strategy and future roadmap for the alt coin on offer through an ICO. Without a good roadmap, any offering may prove a non-starter.
Proper research might reveal similar ICOs in the past that failed or prospered. Understandably, past performance of any ICO is no indicator of success or failure of a newer one. It would provide some idea before you consider investing in an ICO. Often, the ICO you believe may have several salient features that make it worth the money.
Beat The Hype
Never follow the hype and rush to invest in an ICO. With a score of ICOs cropping up annually, every promoter will excite their ICO in a bid to attract a large number of takers. If you are a first time investor in crypto-currencies or not very experienced with ICO and its workings, we recommend you study the offering first.
As mentioned earlier, you will most likely come across ICOs and existing alt coins that have similar features. If an ICO is indeed hyped, find the significant features of the crypto-currency that vary from others. If the hype is about nothing or something rather insignificant, you can consider ignoring this ICO.
Look for reviews about an ICO and the website of the new crypto-currency on offer. Understandably, you will find some paid reviews that speak in favour of an ICO, adding to the hype. However, you will come across excellent, honest reviews which will help you consider before investing.
ICOs are an excellent way to build a portfolio of crypto-currencies. Considering these five things will help you arrive at a proper decision on investments. ICOs are not cheap or inexpensive by any standard. Hence, astute judgement is needed.