In this article, we will be discussing things you need to know and watch out for before investing in any ICOs, for you to avoid being scammed and for you to be able to invest in profitable ICOs. Before we go further if you don’t have any knowledge of ICOs and how it works click here to find out.
Do Your Research
You have to understand that an ICO is a startup and needs funds to bring what is in the white paper to reality, that is, to develop the actual product or service.
So you must do your research by trawling the Internet and asking all your questions on ICO, cryptocurrencies, and Bitcoin forums. Keep in mind that you could lose 100% of your investment if it is a scam.
What are you expect to search about are:
- Can the team deliver based on their experience?
Read their white paper and go straight to the founding members and the team. Look at their profiles on LinkedIn. See how much history they have in the space – we are looking for people who can deliver on their promise.
If not, don’t even bother continuing. Find out if the team has any crypto experience and – more importantly – which projects, or ICOs, they were involved with and the impact they had.
If you are satisfied that they can deliver, continue your research. You can also go into cryptocurrency forums like BitcoinTalk.org, to see what other experienced investors are saying about the Project and ICOs
- Is the project solving a problem/is the idea needed?
Is there any certainty in their idea? Is it solving a problem? Is there a possible thirsty market for this? Does it have a likelihood of prospering? What do your gut instinct and experience tell you?
After reading it, you should be able to answer a simple question – what kind of value does this project bring to our world?
Next, is it a new concept or are they developing something that someone else already has developed? Don’t just jump into a new token for this new market.
It can just be a token having the same functionality as an already existing coin. don’t invest unless you believe that this company can do it much better.
- How much money is being collected?
Avoid ICOs which allow unlimited funding. An open cap allows investors to send unlimited funding to the project’s ICO wallet. If too many of the coins are circulating, the less unique your tokens become for trading afterwards – through less demand.
- What are they using the money for?
Next, what are they using the money for? What percentage will go to the development budget, the marketing budget, and other essential allocations?
In the past, many ICOs have not given this level of transparency but in the end, don’t you want to know where your money is going to be allocated to and if this makes sense to you?
- Token value
Next, look at the token value – is the current value worth it? Do you think it has a chance of rising in value to make you enough profits? Do they have too many tokens on offer which will saturate the market? Are there any reasons to use their tokens because in the end, even if it is a great idea, you will only make money if the tokens you have will increase in value over time? Etc.
If you can answer these questions as best you can, then you have done the work required to lower the risk of investing. Remember that your risk is 100% and with several of them, this is likely to happen.
- Token distribution – when and how
Greed can be defined by a high token distribution to the team members, let’s say, more than 50% of the tokens are uncertain.
A good project will link its token distribution to the roadmap because each phase or milestone of the project requires a certain amount of funding. Watch for the token distribution stage.
Some projects just release their tokens hours after the ICO has ended. Some projects need to develop a beta version before sending out the tokens.
After finding out about the above questions it is also important to find out what the token is for.
Now if you have found a satisfying answer to all the above questions then you can now go-ahead to change your fiat money into bitcoin, Ethereum, and BNB, depending on what the developers demand and the blockchain the project is built on.
It is worth noting that the startup will then exchange your investment money for fiat money to pay for its development, costs, etc.
Then you can now send your cryptocurrency to the address provided by the startups, it is also worth noting that most startups might not accept Bitcoin, Ether or BNB sent from an exchange and several exchanges wouldn’t send Bitcoin, Ether, or BNB to ICOs startup, so it is advisable to use an online wallet.