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Evaluating an Initial Coin Offering Investment Opportunity

Mashell Chapeyama

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Evaluating an Initial Coin Offering Investment

In recent years, Initial coin offerings were a popular way of investment. But what does Initial Coin Offering (ICO) mean and involve? This is very simple to understand. An ICO is a method of crowdfunding for a product or service where investors contribute through cryptocurrencies.

An investor cannot contribute to an ICO using national fiat currencies, like the US dollar or pound. As of now, there are no regulations involving initial coin offering, therefore a potential investor should research widely and ensures that he/she is putting his/her funds into a worthwhile opportunity.

The sad thing is that if an individual does not take due caution, he/she can invest in a crypto project which will flop, thereby losing the invested funds and the expected returns. What should an aspiring investor check on an ICO investment opportunity?

Researching ICOs

In this article, we discuss a few ways of assessing the investment potential of an ICO. Although such an assessment cannot give you a hundred percent assurance of the success of a project, it points out the potential risks and opportunities.

Analyse websites that list ICOs

There are several websites that list ongoing and upcoming ICOs. Search through these websites to find if the ICO you want to invest in is listed there. In most cases, genuine ICOs supply their potential investors names of their partners, including the ICO listing websites.

Analysing the whitepaper

As we know, the whitepaper is a document that has details about a cryptocurrency and the entire project. It describes the scope of the project, the roadmap and token distribution. It is important to identify the competitive advantage of the coin or project before investing it.

In addition, the whitepaper explains the purpose of the cryptocurrency in detail. Also, it is essential to invest only in a cryptocurrency with outstanding fundamentals. This is because these fundamentals are the ones that drive up or stabilise its price.

Previously, by failing to analyse the fundamentals of a cryptocurrency many investors lost their funds when such projects flopped. If the whitepaper does not give full details of the project such as roadmaps, token distribution then better stay away from such a cryptocurrency. This is because if the team does not spell out clearly what it intends to achieve, how will it successfully implement the project?

The team

A great team will make the project succeed. Therefore, an investor should analyse the nature and composition of the team. Generally, a reliable team should be balanced in terms of skills and age range. For instance, the team should compose of engineers, marketers, business analysts and other crypto experts. The important thing is to assess the team for diversity and experience.

You can check the skills and experiences of the team members by assessing their various social media platforms, such as Twitter, LinkedIn and Facebook. Also, check out the projects in which the different team members have participated before. This should give you a clear hint of what they can achieve.

Community

Good crypto projects have a high presence on various internet platforms and social media messengers such as Telegram, Facebook, LinkedIn, Reddit, Medium and Bitcointalk. However, the first port of call is the project’s website. On it, you can find the road map, description of the products and related information.

On the other hand, a promising project should have vibrant communities on social media. Usually, these platforms should have many active participants. The nature of the discussion and the ease with which the team explains its vision can tell you if they know their products and project in detail.

From these social media platforms, an individual can track updates and developments that are taking place.

Partnerships

A project’s partners tell much about the prospects of the cryptocurrency. This is because the success of a cryptocurrency also depends on its partners such as decentralized exchanges. In fact, as the project develops one of the greatest signs of a potential coin or token is the range of partners, it has. The more partners a project has the better the chance for success.

Competing tokens

Whereas many emerging cryptocurrencies have much to offer to the crypto communities, they do not acknowledge the existence of competing projects. However, after reading their selling points, every investor should research competing coins or tokens. One does this by analysing the top cryptocurrencies in the industry. For instance, you have to understand the functions of the top 100 cryptocurrencies and check if there is any one of these which competes with the coin or token you want to invest in.

Some projects state competing cryptocurrencies in their whitepapers. In such cases, an individual should carry out an independent assessment of the competitive advantage of the new coin or token. However, it is possible that the new cryptocurrency may be far superior to the existing one. If that is the situation, one can invest in it with confidence.

Token distribution

This is another important aspect an investor should analyse before pouring his/her funds into an ICO.  A great project links the token distribution to the roadmap. This is because every phase of the project requires funding. The allocation of a sizable quantity of the token to community development and marketing is a sign that the project is poised for success. On the other hand, the team can show that it is greedy by having a large allocation of the coins.

Conclusion

Careful examination of the above aspects can help an individual to choose the best ICO to invest in. However, the fact that the project scores highly in most of these attributes is not a guarantee for success. Therefore, at times, if someone intends to invest a large sum of money into a project, it is best to seek analysts’ assessments and advice.

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