ICOs have been praised for bringing huge returns and criticized for often being scams, so how should they be viewed as an investment?
Since ICOs started to gain ‘mainstream’ attention in the past year, many articles have revealed that large percentages of ICOs turn out to be scams or completely fail within their first six months. Investor woes have called for national and local regulation in many areas while hardened traders understand the fast pace change of trends in ‘the crypto world’, meaning that all ICO investments and crypto trading is merely short returns.
Most ICOs live off of the social media hype given to them from crypto influencers, celebrities, and mainstream news attention. A saying often circulates in this regard, “buy the rumor sell the news.” Since the large crash that happened in January/February, much of the new money left (mostly at a loss) but ICOs are still profitable as the market starts to recover.
Crypto Influencers Always Win
It’s likely that if you’re famous in the crypto world for your ICO reviews or commentary on various projects, you’re monetizing (or should be) your audience. Some influences “earn” tokens from “advising” on various ICO projects while others openly (or secretly) accept payment for an ICO review. Why does this matter? With large audiences, those ICOs can attract more potential investors.
How do you beat the influencers? DYOR (Do Your Own Research). Many influencers hire teams or build communities to contribute to create ICO reviews. It’s tedious work but work that highly trained and educated CPA/CFAs might find while working for VC or investment funds these days. Is ICO reviewing and VC project scouting the same thing? No, but you should try to think in their shoes. Don’t just buy into whatever that ‘exclusive’ presale group is buying or whatever that crypto twitter personality is shilling, research it for yourself.
The Magic Of Spreadsheets
At the height of the crypto boom, everyone was creating spreadsheets based on people like Ian Balina or OhHeyMatty. There’s nothing wrong with that but if you’re serious about your money, you need to understand every part of an ICO and write down a system that you think can prove a significant return rather than just copy what influencers are doing.
Separate groups for categorical information: Dates, Registration Process, Token Metrics, Presale info, Company info, Community, and Risk analysis.
These can be further subdivided as well but certain elements are more important than others.
Token Metrics: Total Supply (TS), ICO Supply, Softcap, Hardcap, Token Rate (TR), Market Cap (TR x TS), Is There A Token Burn?, Token Distribution Plan, Use of Proceeds/Funds, Vesting Periods for Team/Founders/Advisors.
I excluded Presale info from token metrics because they’re just as important on their own. Presale group/pools can get a large allocation of the ICO supply at a huge discount, so it’s important to know how much and the discount percentage, and the lockup period for presale contributors as well.
If an ICO is offering 75% (75m) of their supply (100m) for a TR of $0.02, it sounds like a good deal. But wait, you found out that the presale ended and they sold 80% of the ICO supply at $0.001. That’s a huge discount on the majority of the supply, what’s worse is that they’ll dump it on exchanges since there is no lockup period.
For the Company section note where (or if) the company is incorporated, what stage is their product/platform/etc (MVP, Alpha, Beta, Full Release?), is it a security?, does it use blockchain efficiently or is this just a glorified fundraiser?, Who are the advisors, partnerships, and team and what is their experience? What is their roadmap and how far are they into it?
Remember to check out their Social Media pages as a lot of scam ICOs buy followers so look for activity reflecting their numbers. If they have a github, are the repos private or if public, what work have they done on it if any?
Finally analyze Risk for yourself. Consider the above qualities of an ICO and measure what loss and profit you may have if you invest.
This is a general overview that I hope will help some people as you will never know what you will find in an overly hyped ICO that later gives you negative returns.
If you found this helpful please check out our site for ICO reviews, an ICO spreadsheet, and much more!
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Great work for a first post! It's nice to be reminded of how to invest in ICOs, one more piece of advice is spread your bets. You will come across many that pass the test of a good investment, so don't go all in on one or two.
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