Despite all the difficulties, initial coin offering (ICOs) are more popular than ever. Since major currencies such as Bitcoin (BTC) and Ripple are not always profitable, it may be worth investing in an ICO. But how to make the best possible investment and what should be considered? We answer your questions in the following guide.
Why is investment in ICOs useful?
Are you interested in new projects in the world of cryptography, but you are not yet sure if you should invest in an ICO? ICO is an abbreviation for Initial Coin Offering and is derived from the name of an initial public offering (IPO). However, instead of shares in the company, ICOs sell coins or tokens. These take the form of a currency or can be exchanged later for old coins. Essentially, companies are trying to take advantage of an ICO by highlighting its long-term potential.
For investors, an ICO investment is an opportunity to buy a cryptocrown early enough that it is not yet ready for the market. Since the investment involves a high level of risk, you will generally benefit from discounts and other advantages. If success is early, the value of a token increases by a multiple of the price paid at the beginning.
Why are ICOs so popular?
ICOs are inherently risky, but still very popular. Finally, investors in OICs have the opportunity to earn money. Year after year, the amount was raised through the initial issuance of coins, reaching a higher value ($6.3 billion) in 2018 after three months than in the previous year as a whole. Similarly, 59% of the total number of ICOs from the previous year were already recorded in a quarter. As recently as 2016, the volume of ICO investments was $101 million.
The growing popularity of ICOs is mainly due to the evolution of the financing model. Just follow what happens on social networks and websites like Icotoplist.com that deal with crypto currencies. In this website also have regular information on current and future ICOs, as well as ICO ratings.
Find the right project through ICO analysis
It makes the most sense to carry out an ICO analysis in order to examine more closely the reliability of a project. The 2014 fraud wave led the ICO community to work to improve the situation in order to eliminate the last black sheep.
It is worth noting the differences in the way the ICOs operate:
Some ICOs use a Bitcoin public access address to keep track of everything that is happening. As far as privacy is concerned, this strategy is unfavourable, as investors can be traced.
There are also ICOs that use existing encryption protocols but play their tokens as a separate layer. These include, for example, Mastercoin and NXT.
As the target group of offers changes over time, ICOs are now announced differently than before. Insider forums have been replaced mainly by Reddit and social networks. Of course, the group of interested people is also growing.
Important characteristics of an ICO
There are three important features that are announced when information is first disseminated in forums or social media. These are the following points:
White Paper: All the important features of the project are described in detail in the White Paper. In addition, it is the distribution of funds and coins.
Project objectives: What are the ICO’s objectives? Where do you see the benefits of the ICO in the real world?
Timetable for the ICO and project development: During what period what objectives should be achieved? What remains to be done in the future?
It may be wise for you to invest in an ICO as soon as possible, if you are convinced of it. This is mainly due to the high discounts associated with them and the relatively short periods during which the ICO takes place. If an ICO has reached the desired amount, it could even be terminated early.
Risk analysis with ICO ratings
It is not an easy task to find successful initial parts offers. To perform a risk analysis, you need as much information as possible about them. As mentioned above, future and current ICOs are announced through various channels and many companies rely on continuous advertising.
The following sources are best suited for information collection:
- Websites reporting cryptocurrencies
- Facebook groups
- Crypto forums, including bitcointalk.org
- Twitter channels of the ICOs
How to properly invest in an ICO
There is no single way to invest in an ICO. While you only have to visit an exchange when purchasing Ethereum (ETH), starting capital is the basic requirement for an ICO. As such, most are BTC or ETH, which you should keep in a wallet. A simple transfer to the given address is required to invest in an ICO. The received tokens are kept in a crypto-wallet, if possible a hardware-wallet. Once the hoped-for price rises, you can sell the tokens and profit from the profits.
Basically, there are three strategies to successfully invest in an ICO:
- Invest in an ICO with personally exciting projects.
- Invest in an ICO that aims to solve problems in the real world.
- Invest in an ICO with supposedly great financial potential.
Above all, it is important not to let your personal preferences get in the way of a successful investment. If your main goal is above all the financial benefit, the third strategy is most often worthwhile in most cases.
As long as you follow these guidelines and have a detailed look at an ICO before buying a token, there’s nothing in the way of the ICO investment.