Today I will be talking about a few indicators you should consider before investing into an ICO. ICOs are risky investments and some investors have lost a lot of money through ICOs, others however have made a fortune. The following indicators are similar to that of investing into startups.
Always check to see if the company has already tested a preliminary product or concept. Without any proof of concept you will be unable to rationally make an investment. If the company simply has a whitepaper without any proof of concept you should consider this a red flag. You should not throw your money at something you are not certain will have practical usability in the future. Many investors have lost their investments this way through ICOs and there are a lot of scammy ICOs that do not even product a product or service after the ICO; shutting down after pocketing investments.
As with picking post-ICO cryptocurrencies to invest in, always take into account the cryptocurrency's core team. Do they have any background in the industry they are trying to penetrate? Does anyone in the team have prior experience with cryptocurrency and blockchain? Always consider who are behind the project. Without an experienced and skilled team, the project will not find success. Most scammy ICOs consists of inexperienced individuals behind the project.
Does the project have potential usability in the intended market? Do they have a target market? What are their goals and how is their project going to solve existing problems the market has? Do they intend to solve a problem that the market will have in the future? Is there a need for a blockchain to solve the problem? Why create a native token and not use existing cryptocurrencies such as Ether, Bitcoin, or Litecoin? How will the project be executed? What competitive advantage do they have over other cryptocurrencies in the industry? These are questions you should be asking when weighing the project's use case. All these questions should be answered in their whitepaper. You should pay most attention to and explanation of why there is a need for a blockchain. If the whitepaper cannot answer why there is a need for a blockchain, you shouldn't invest in the ICO.
Is the market ready for the new technology? Is the technology too overwhelming for market? Will the market find any use for an innovative technology in the industry? A market that isn't ready for new technologies will be very difficult to penetrate. Take for example, Google Glass. Its initial release in 2014 didn't find much success simply because the market wasn't ready for the technology. Recently however, Google Glass 2.0 has been welcomed by the market who now have practical uses of the technology. Timing of the product release is key.
I hope you have learned a few things about choosing ICOs. If you would like to learn about why you should buy Bitcoins for the future check this book out.
Please note that I am not a financial expert. I am simply sharing my opinions on the topic. Do not take my words as financial advice. Always do your own research.
