loader

Doing your homework

Transparency

A solid, credible and investment-worthy ICO should be as transparent as possible. Don’t forget, you are giving away your money for a future promise, so information is key. Look for this transparency in several elements:

The Team

It should be easy for you to know who the team are, their names, backgrounds, contact information and basic bios.

question tree

Funds Distribution

A serious and reliable ICO will usually provide you with the full plan for the funds they raise. This means the net number of tokens, how they will be distributed,  the percentage to be sold and kept inhouse, plans of reinvestment of raised funds (how they will actually develop their start up) and sometimes even distribution of funds within the company.

The website

This may seem basic but is all too often overlooked. The website is the company’s calling card, their public face. How professional and relevant the site is can be an excellent indication of how serious the project is. Also, you can check transparency by the information provided. There should be information about the team, any partnerships, and project goals among others. If the website looks haphazard or light on information this can be a red flag.

Token allocation

Token allocation can also be a very strong indicator of an ICOs intentions and credibility, as well as whether they are the right fit for you. For starters, take a look at how many tokens there are in total, if it is a limited amount or not, then how much is intended to be sold and how much is intended to stay in-house. You should be able to see in the white paper how the tokens are going to be allocated within the company. Also, check the price of the tokens- too low or too high can indicate a problem. Overall, if you can see a solid and reasonable business plan within the token allocation it would be a good indicator.

The team

The team is one of the most important factors to consider when investing. At the end of the day, they are who you are putting your money and faith in. Without a good team an ICO has almost no chance of success. You must put in the time to research the members.

First and foremost, make sure that you have full transparency of all members of the team. As you start to research pay attention to how hard it is to find information about them, the less you can find, the more you should be skeptical.

Getting information

There are several places you can go to find out more information about team members. Firstly, check the website. There should be a clear breakdown of who the team are. Once you know the members, you can look into them on LinkedIn, Google, Github, AngelList, Twitter, and other social media sites.

What to look for

When you are looking into the team members you should be checking if they have the capabilities and reliability to produce what they promise.

Past experience.

check where they have worked in the past. Do they have a good track record and a good reputation in their field? Have they worked for reputable and successful companies? If the answer is no you should be wary.

You should also check if their experience is relevant to the project they are trying to launch. If no one in the team has significant knowledge and ability in the startup they are creating it is a serious red flag.

Team Dynamics

Has this team or members of it ever worked together before? Do any or all of them have past success or serious failures? If the team cannot work together well there is no chance the ICO will succeed.

Knowledge of blockchain and ICOs

It is crucial for at least one of the members of the team to have experience and understanding in the crypto world. If they do not, it would not be possible for them to run the startup successfully.

Token type

If you decide to invest with a project ICO, you will be getting a token. The token will either represent an actual commodity or asset, or it can be used for goods and services. When choosing, consider whether what you are getting is relevant for you and also if it is a reasonable pay off for your investment. Another important issue to consider, is what the value will be in the long run- is this an asset or service that can truly be useful.

 Signals

Signals are another tool to help us evaluate the validity of an ICO. They can be divided into two categories- social and investment. Signals are basically beacons that tell us what other traders or investors are doing, and how the community is receiving a project. It is always important to choose which signals to follow carefully.

Social Signals

Cryptocurrencies are based on a community and it is a driving force in successes and failures. Therefore, it can be extremely useful for us to see what the community thinks of an ICO we are considering investing in. Some useful platforms to look into are Facebook, Twitter, Reddit, Telegram, and Slack. One aspect to check is how big a following a project has. However, it is important to note that a large following is not enough, you also need to see what is being said. Sometimes, followers are faked to try and create buzz so if you see a lot of people but not a lot of conversation and excitement, be suspicious. Also, what the followers have to say can give valuable insight into the validity of the project.

Investment Signals 

This basically means considering what major players are investing in. This can help us not only find out about notable new ICOs, but also understand which ones have solid standing. Major players can be individuals or companies, but choosing the right investors to follow is crucial. Consider whether they have similar styles, needs, and intentions as you and how successful they have been. Also, do not forget that this does not negate the need to do your own research. Even the most successful investors can make mistakes.

Another useful signal to look at is partnerships. If an ICO is getting support from a credible company, it could mean that there is real potential in the ICO. Also, having a powerful partnership can elevate the ICOs chances for success and provide even wider horizons for future development and growth.

White paper

The ICOs white paper is another chance for the ICO to introduce themselves to the world. Often times, the quality of the white paper can reflect the quality of the project. One aspect to look at is how in depth a white paper is. The more concrete detailed information a project gives us, the more we likely that it is credible. Another thing to look at is how clearly the idea is delivered. Vague, unclear language can indicate that something is being hidden.

Staying current

The world if ICOs and cryptocurrencies is a rapidly evolving ecosystem. Things happen extremely quickly in this arena and if you want to be a successful and responsible investor you must be on top of it. It is important to not only follow what is happening with your ICOs but with the whole industry. You can do this by following relevant new sites, blogs, and even some social media. Another important factor to keep an eye on is regulation. Authorities are constantly trying to find ways to regulate this field and at the moment each jurisdiction can impose its own regulation, meaning that it can vary from place to place and ICO to ICO so you need to know what is going on where you are. Also, new regulations or governmental involvement can have a big influence on the market.

Share this Article: