Choosing a good ICO (Initial Coin Offering) to invest in can be overwhelming for a new investor. At present there are over three dozen of upcoming ICOs, 58 Ongoing, and 484 completed. Therefore, the question is, how do you choose a quality ICO?! The answer is by doing your own research (DYOR). There are hundreds of opinions from YouTube podcasters to ads, articles, all claiming to do market and coin analysis and choosing the next winner. But there’s no replacement than learning the material on your own, understanding its value, and making your own informed decision.
In order to be successful and not become the victim of a scam you have to know what you’re doing and what you’re putting your money into. It all starts with what a plan, with asking yourself the question of what do you want to do? What is your goal? Are you after short term gains or long term investments? This decision will give you a direction and your available choices.
The basic premise of any investment is make profits. ICOs offer you a good opportunity to do this but they are extremely risky. It is estimated that approximately 50% of all ICOs launched in 2017 failed or struggle to achieve the ROI (Return on Investments) that buyers expected from them. And after the dust settles, meaning after competition and regulation have ran its course, approximately 90% percent of all ICOs will be gone. That is not conjectured; this that is a fact. This is simply because ICOs are no more than the idea of a product proposed to solve an existing problem, therefore, the success of an ICO is dependent on whether the developing team is able to deliver on its promises and the technology behind it is sound.
Short term gains
If your goal is quick cash then most of the FUD (Fear, Uncertainty, and Doubt) behind the target investment ICO is not as important the hype behind it. Short term investors look for ICOs that look good on paper and attract a lot of attention. An example of this is CREDITS (CS). One of the reasons Credits is extremely popular at the moment is the rumored ostentatious claim to be able to resolve the blockchain scalability problem and achieve over one million transactions per second. To anyone who understands how the blockchain works and the difficulties involved in its scalability, this is an exceptional claim given the current transaction speed of the Bitcoin blockchain is only three to seven transactions per second.
Legendary astrophysicist Carl Sagan once said “Exceptional claims require exceptional proof.” However, in its whitepaper, Credit does not adequately or convincingly detail the process involved in achieving this. So this is a major red flag; but for short term gain investors that doesn’t matter! – All it matters is that it captured the attention of the public and can be profitable.
Short term gains are best achieved during a pre-ICO or crowd sale. That is when experienced investors make their move. It’s when low entry investments can make for the highest profit. Take Populous coin (PPT) for example, it launched its pre-sale on June 24th, 2017 at $ .25 cents (it sold out immediately), seven months later, on January 30, 2018, it reached $75.46, that’s a 300X gain. In other words, a $1000 investment at ICO price would have become $301,084 minus fees. And there are coins that achieved 5,000X gains, but before you rush into buying any ICO, you must beware of scams.
The explosion of interest and the waterfall of money that came pouring with it into the crypto market inevitably attracted criminal activity. A lot of developers turned from creating Daaps (Decentralized applications) which served a real purpose, with real value, to producing “flash coins” popularly used for pump and dump. One of these is UET (Useless Ethereum Token) which launched a one cent on July 13, 2017 as a joke token, but then climbed to .24 on Jan 30, 2018. A $1000 investment at ICO price would have become $24,000 minus fees with a market cap of almost one million dollars. So before you go buying into any coin for profit alone, think about this: How hard is it to create an ICO?
Well, first you need an idea; obviously, the better the idea, the more likely its success possibility will take hold in people’s minds. Second, you write yourself a whitepaper, where you address the problem you want to solve. In it, you list how you intend to distribute the coins percentage wise to developers, investors, and the public; as well as well as defining your team, and the technical aspects of the infrastructure development. Third, you publicize the project and raise awareness by building a website, posting ads on crypto community sites, and spread good old fashion spam all over the internet. Lastly, comes the best part, the pre-sale and ICO release.
As I mentioned before, all this process doesn’t have to be precise or even complete to appear to be a real project. All scammers need is the appearance of solidity for the public to gain credibility in a coin. In addition, there are websites like Coinlaunch.market where people can design and launch a coin of their own. So you have to be cognizant of these ventures and look for potential red flags that will save you the grief of investing in an ICO for profits but disappear before you can sell it. In the case of Credits (CS), the use of an MD5 hash encryption protocol is a major red flag for serious investors in the simple fact that MD5 is obsolete and it’s susceptible to hacking. And while it can be argued that the details of a project in a whitepaper is only the initial description and that changes will be made as the project progresses, this particular item raised an eyebrow on experienced programmers because it was so easy to just advise that a more contemporary system like Hash 256 would be used. This statement begs the question on whether the team actually knows what they are doing.
SO HOW DO YOU PICK A WINNER ICO?
Long Term Investment
The conservative and more proven approach to investing in an ICO is to look for long term growth. This is also true given the market volatility created by impatient investors who sell as soon as they made ten to 100x their investment. In looking for a long term investment, you need to look for a purposeful ICO, one that is going to deliver value as well as innovation. In understanding the qualities in an ICO one has to look for a few things: Pain, Value, Team, Roadmap, and Volume.
The pain is the problem the project is trying to solve; the core of the idea. This the most significant part of how the project will fare against the test of real world application and the value it will hold in the long run. For example, the Populous coin proposes the instantaneous settlement of invoices. Ordinarily businesses have to wait until the customer pays the invoice to receive capital; this can take days, sometimes months. In the meantime, the business has to reach into their own cash reserves to cover the operating cost of the service. Populous is a trading platform where buyers can buy the invoice from any business, globally, at a discount, and settle with the customer later. This creates for instant cash flow for the business holding the invoice and for a small profit for the buyer of the invoice. As discussed, the Populous coin grew exponentially due to serving a real world need.
The value is the impact the project will have on people’s lives. Is the project the next Ipod, or is it a gimmick; is it unique or just a replica? How much competition does it have? Is it in demand? The Nano coin (XRB) offers to improve on the Bitcoin idea of universal currency by offering instant transaction and no fees. In addition, it offers advances on the scalability problem by the use of a block lattice structure. Even though Nano doesn’t offer a new concept nor is the only player in the scalability game, it offers a competitive solution. This makes it valuable and in demand. Nano did not have an ICO, it launched at .10 and it has risen at over $13.
A strong team is a good sign that the project is serious. It is important when the team is composed of members and advisors with experience in the field that the ICO is trying to impact. For example, David Martin, the Co-founder and managing director of the Power Ledger (POWR) coin has twenty years’ experience in the utilities industry holding two positions in state-owned electricity utilities. The team is also the face of the company and it is important for renowned leaders to put their name and reputation on the line for the project. The number of members in a team is also important as this brings a larger breadth of experience that will come into play when developing new technologies or entering a new market.
A roadmap is the blueprint of how the team plans to take the idea of a project from a dream to reality. It outlines the objectives the project wants to accomplish and when. The more complicated the idea, the longer the roadmap should be. If the project offers to solve a complicated problem like scalability using a standard approach with a 60 day calendar, it would make for an extremely suspect project.
The volume is a demand indicator for crypto currency; the higher the volume, the higher the demand, the more people buy. When considering investing in an ICO, it is recommended to buy into one that has enough volume to be able to make it easier to buy or sell it.
So depending on what your purpose is, the choices become apparent: short v long term, quick profits v steady growth. The potential for quick profit in the crypto market makes for an irresistible proposition, but you must also be realistic. Keep in mind that the average return for stocks in the stock market is only 7%, not 5,000% as is the case with some coins. Stocks that return 20% are considered heroes. As more ICOs flood the market, the opportunity for profit and loss is obvious. The average investor must learn to identify the good from the bad, the chance from the traps, as to not become another of the countless victims of scammers or hackers. In seeking short term profits, it’s important to monitor the gains of any project and avoid the temptation to sell too early and miss out on profits. Just as important is to sell as it begins to drop as the unpredictability of the crypto market also makes ICOs devalue just as fast. Lastly, if your goal is to attain long term profit growth, then it is extremely important to hold or HODL during the dips in the market and to diversify your portfolio to maximize potential growth.