Miguel Leite Follow Co-founder and CEO of Coinvision. +8 years experience in tech and blockchain startups. In crypto for the tech.

12. How to Invest in ICOs

3 min read

How to Invest in ICOs - Coinvision

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Ok everyone. So we now understand how to buy, secure and trade cryptos. Now it’s time to learn about what an Initial Coin Offering (ICO) is.

What is an ICO?

An ICO is a form of crowdfunding that emerged within the crypto world. In the short time that they have existed (the first ICO was held by MasterCoin in mid-2013), they have become immensely popular with new blockchain projects, as a way for raising funds for project development. They are also known as crowdsale or token creation event (TCE).

An ICO is a similar process to an Initial Public Offering, for when a company gets listed in a stock exchange.

Basically, a team with a blockchain project offers tokens that will serve for exchange of value in its platform, in exchange for money from investors. Those tokens are then listed on exchanges and traded freely in the open market. The token value is set during the public sale at a price, against Bitcoin, Ether or other major Cryptos.

2017 marked an incredibly good year for ICOs, with many tokens skyrocketing in price once they were listed on exchanges, and served the purpose of fundraising for many projects exceedingly well, with billions raised for development.

How do I find good ICOs to invest in?

The great advantage of investing in an ICO, is that, when in bull market, most tokens tend to greatly increase in value once they are on exchanges. Besides, many teams offer bonuses for early investors ranging from as little as 5% to as much as 50%.

The question is, how do you know which ones will perform well? Well, here the process is similar than what you do to select coins to invest in, although now we only have fundamental analysis to go for, since the coin is not traded yet.

1.Value proposition

So, first, go through the whitepaper, understand the value proposition, evaluate if the problem the project is trying to solve is of relevance and consider if the solution proposed adequately responds to the problem.

2. Roadmap

Analyse the road map and assess if it is ambitious, if it is too ambitious, detailed or sketchy, concrete or conceptual. A reasonably ambitious road map with concrete landmark goals is a fundamental sign of a healthy project.

3. Partnerships

Then read through the team’s publications, take note of the partners involved in the project and if any venture capital groups have already backed the project.

4. Team

Is the team they qualified? Are they working full time on the project? Do they have experience with other successful blockchain projects and with the industry their project is trying to address? Look at every side. Do they have a working marketing team, do you think they project their idea successfully? These questions are fundamental to understand if the team will deliver what has been promised in the road map.

5. Community

Now, in crypto, more than perhaps any other sector, community is everything. The audiences engagement tends to be very telling of how much backing the project will have, and how much interest there is in the token. Take a look at their discord and telegram channels and see how responsive and engaged both the team and the community are with the project. It doesn’t matter how good the whitepaper is, if the community does not support the project, the token will not be worth anything.

6. Token

Now, the token itself. What role will it have within the ecosystem? Does it exist only to fund the development team or does it actually play a role that will make it necessary in the platform and promote wide adoption.

7. Product

Finally, the product and technology, the most important piece of the puzzle. How far is the product from reality? Does the team already have a working product or at least a prototype that you can experiment with? A working prototype or a live testnet before the ICO are very good indicators that the team will be able to deliver on its promises. Remember, by buying tokens of ICO projects you are investing and as an investor you have to doa detailed due diligence.

Scams

The crypto world has known its lion’s share of scams. Some are easy to spot, some are well disguised. Check forums, google search keywords like “scam” in combination with the project. The crypto community is unique in its activism and paranoia, use it to your benefit.

Who has the time for all this?

Financial stakes are always to be taken seriously. Blind investments is the perfect recipe for loss. Unfortunately, most of crypto entusiasts have a day job and a personal life that does not let them put all their time into detailed research. That is why Coinvision exists. We do the research, follow the communities, speak with the teams and continuously scout the market for the best ICOs out there, so that our members can jump on the right opportunities with ease. Our community discusses the pros and cons of the upcoming projects at length and constantly helps out with doubts and questions. You can get started here.

Buying the tokens

Most ICOs have very clear procedures for investors (If they dont you probably should not be investing in them). These days, most require whitelisting in advance and demand that investors answer Know-Your-Customer questionnaires as some countries forbid their citizens from participating. Once that is done, all you have to do is to transfer the amount you wish to invest to the account provided under the smart contract overseeing the ICO. Remember, never transfer funds directly from an exchange to an ICO. Always use a wallet in which you control the private keys.

What do I do with my ICO token?

Once the tokens are created and distributed to every investor, you might not be able to do much with it. A few days or weeks might pass before the token is listed on an exchange. Be patient and follow the news surrounding the project to assess how things are evolving. Also, the impact of listing on an exchange like Graviex is very different than to be listed in a major exchange with great volume like Binance. It might be worth to wait for the token to get the right exposure before you consider taking some of your funds out. Afterall, if you really believe in the project, then you believe that the token will be important in the future and that means it will continue to increase in value.

Stay safe.