Initial Coin Offering (ICO) investing can be an exciting way to jump in at the ground floor of an exciting project and potentially reap financial benefits, but before you take the leap it’s essential that you carefully consider several key points before diving in – from understanding what an ICO is to researching its team – five things should be kept in mind before investing in an ICO. Conducting adequate research and being aware of potential risks can ensure you make an informed decision which can maximize your return.
What Is An ICO?
An “initial coin offering”, also known as an ICO, is a way for new blockchain projects to raise capital by selling tokens for cryptocurrency such as bitcoin or ether. Investors hope that their token’s value will appreciate as the project advances; then sell at a profit later. ICOs are unregulated and highly speculative investments.
No ICO guarantees a return on investment, so cryptocurrency investing isn’t recommended as a reliable method to make money. Only invest money that you are comfortable losing; but for those curious about blockchain and wanting to support projects developing new decentralized systems and applications, ICOs provide an ideal way of contributing.
Things To Consider Before Investing In An ICO:-
1. Understand The Team Behind The Project
Considerations should be given when assessing the team behind a project, including their background and experience. How long have they been in the industry, their track record, notable accomplishments or connections; motivation behind building the project itself as well as whether there is a clear vision and realistic roadmap for completion?
What are the team structures and compensation practices? Looking at the structure and composition of your team can give insight into its viability and potential success. Keep an eye out for strong advisors or board members with high-profile reputations who could have an enormous effect on its outcome.
Your team’s success at raising funds through an ICO depends on the strength and experience of its partners and advisers, as well as that of any backing investors such as community members or any reputable investors that might support your project. Do they share similar sentiment? Is there an active discussion around your proposal?
2. Research The Technology And Roadmap
There are many ICOs founded solely on a white paper and dreams. If the project lacks a technical roadmap or technology outlined clearly in a technical white paper, proceed with caution. You need to know exactly how the technology will function within its ecosystem as well as any problems or needs it intends to meet in terms of market demand for its deployment.
How does the technology behind my project function, and how are tokens utilized? Tokens are an integral component of many blockchain projects, providing vital functionality to users as well as being valued assets themselves. Their value directly corresponds with usage – meaning more people using and adopting the technology means a higher valuation for tokens with unique or more specialized purposes than simple payment processing capabilities.
3. Review The Regulations And Risks
Initial coin offerings (ICOs) are an emerging and quickly developing field, so their regulations remain relatively undetermined at the present. Although these regulations could change in the future, it’s essential that investors be informed about what currently apply in terms of regulations and risks associated with ICOs today. In particular, the Securities and Exchange Commission (SEC) is investigating these offerings before considering regulatory actions against them.
Already, it has started cracking down on fraudulent ICOs and issuing fines indicating a strict enforcement regime. Furthermore, in the near future it’s likely that ICOs will become securities regulated by the SEC; this would require projects to register with them as required and adhere to stringent laws and regulations, potentially leading to an explosion in registrations for such offerings.
4. Assess The Market Potential And Demand
Your first priority when considering investing in any project should be carefully evaluating its market potential. How large is the target market of the investment project you’re contemplating investing in? Does demand exist for its services or products? And, finally, how does it stack up against competing initiatives and market shares within general? A project with limited potential that tackles smaller markets but has more competition is less likely to succeed than one focused on larger, underserved ones.
Considerations should also be given to the overall sentiment and atmosphere surrounding a project. What is the general mood or sentiment among stakeholders around it – is it optimistic or pessimistic? Additionally, what trends exist across similar topics and news articles in regards to general attitudes regarding sentiment analysis?
5. Make An Informed Decision
ICO investing can be highly speculative and risky, so it is wise to conduct careful research before investing. A great way to reduce risks is diversify across a number of ICOs – this way you won’t put all your eggs in one basket and will allow you to benefit from success of other projects even if one or two fail. By conducting thorough research and adhering to these five key points, you can make an informed decision and increase the odds of success!
Also read:- What Are the Benefits of a Reverse ICO?