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8 things to know + 2 anti-scam tips
Investing in Initial Coin Offerings can be extremely profitable — if you know what you’re doing. Since September 2017 I have multiplied my holdings by a factor of 25x simply by participating in ICOs, selling in increments and using profits to reinvest. If I follow the same strategy I’ve been using for the next year and if the market keeps growing, my profits will be approximately $15.5 million by 2019 from a $2,000 investment in 2017.
I am by no means educated to instruct or professionally advice on this matter, but I have managed to invest in about 13 successful out of 15 ICOs to date. 1 out of the 15 was outright just a scam (MovementApp) and another is currently sitting at a -25% ROI(worldcore.com). The 13 other ICOs have given me an average ROI of 2500% as of early January 2018. I’m also currently invested in 7–8 additional ICOs that have not yet hit the market.
In this article I will cover what I believe to be a solid foundation for assessing any ICO before you decide to invest — use it as a kind of guide, if you will.If you manage to read all the way through to the bottom, I’ll put in two extra nice-to-have tips as well.
Here we go!
I’m aware that 13% x 8 is 104% but canva.com thinks otherwise ;0
These are the 8 factors I personally take into consideration. They are in no particular order and are not necessarily of equal importance, but they should balance each other out fairly well. For instance, if a company has no history but an excellent team, that would be OK in my book. Or if they have no beta product but an excellent history or a great solution to a problem, that would also be fine.
There’s really no step-by-step recipe for success and in the end you’ll have to rely mostly on your gut feeling after considering all the facts that are laid out before you.
_Team_
A “good team” can be hard to define and it often comes down to your personal knowledge of the given industry. Having a sense of how many people and what kind of skills it will take to pull off a certain vision is a major benefit when assessing the quality of a team. I always check out the CEO, CTO, COO, and CMO on LinkedIn if they have a profile there (or I just Google them). If I’m not satisfied with the managers of a company I might check out some other key people in a company like the individual developers, engineers, marketing team and so on.Having some good advisors to supplement the team also goes a long way to convince me but isn’t necessary.
__Product_
Most of the ICOs I’ve invested in have had some kind of alpha or early beta version to show off, and some of them have even had working products with a smaller userbase already. I tend to not invest in an ICO if the company can’t at least show some “real” use case for what they are trying to do, but there are probably a lot of seemingly successful ICOs out there with absolutely no product but a lot of hype around it — and they might seem trustworthy and profitable when the token first gets listed on exchanges, but later fall apart for different reasons.Having a product in place before the ICO is almost always a sign that the company is indeed going to finish the development and not just pull the plug and run away with millions of dollars in Ethereum or Bitcoin.
___Market(ing)_
“Look! We’ve created the world’s most advanced something-algorithm-something ever!” — Yes, but.. how big is the market?
Most ideas that are 100 years ahead of their time will either flop or they simply won’t get you any decent return because, well, the market is not there yet. It doesn’t matter if a company claims to have invented an algorithm that can track the heart pulse of every adult polar bear on the North Pole — if the market isn’t ready for it or doesn’t need it, there’s no point for me to invest in it. I personally tend to go for those companies that are targeting mainstream markets for mass adoption HERE and NOW like the Divi Project, Enjin Coin, Electroneum, Simple Token, Cybermiles, Substratum, PowerLedger, Titanium, and so on.
I put the “ing” on “market(ing)” because those two go hand in hand, in my opinion. If a company has invented a mainstream product like, let’s say Electroneum’s mobile *miner, well, they better go berzerk on their marketing because otherwise we end up with an amazing app that everybody can use but nobody knows about.
*It’s only simulating the experience of mining but still rewards real tokens that people can sell for real money.
____History_
Reading up on a company’s history is a great opportunity to perhaps get an insight into what to expect for the future. This point alone could potentially be 80–90% of the information people need before deciding, in my opinion. Don’t believe me? Well, think about this: if Apple or Microsoft launched an ICO, would you invest? Or Facebook or Telegram? Most would say yes without looking into anything else about the project.
But the opposite isn’t necessarily true if a company has NO history. A new company can accomplish just as much as an established one if the individual players — the team — are suberb.
There’s a saying that history tends to repeat itself and, well, sometimes it does and sometimes it doesn’t. It’s up to you to assess whether or not the company’s other qualities make up for a lacking proof of success.
_____Problem/Solution_
This ties into the market somewhat but I would still put the company’s vision as a point on its own; namely, what real-life problem are they tackling and what kind of solution are they offering? Are they focused on business-to-business or business-to-customer? What does the company stand for in terms of ethics (if relevant), and what do they bring to the market that no one else is currently offering?
An idea that can make some aspect of life just a little bit easier for a big group of people is almost always a sure win. Just look at companies like Uber, JustEat, Netflix, and so on. They are all up against enormous industries but they’ve managed to succeed incredibly fast simply because what they are offering is easier and faster than the services that existed at that time.
______Roadmap_
Having a good looking and detailed roadmap goes a long way to compel investors but isn’t that necessary. Most of the time there are delays or additions as a company progresses anyway, so I wouldn’t put too much of an emphasis on the roadmap. If it looks like they’ve thought ahead and also have a nice history of development, that is perfectly fine. If I find that the roadmap is somewhat lacking in future plans or details I might try to ask the developers directly (usually via Telegram) and in most cases it is easy to get a good answer. Sometimes they simply haven’t gotten around to making a detailed roadmap yet because it isn’t really a priority and the team would rather spend their time working on the product.
Remember to ask politely and do your research before asking the team to spend their precious time on you!
_______Token Economy_
The token economy is the way in which the economy of the token is built (no shit, Sherlock?!). This mainly includes the total supply of the coin and the ICO price at which it is offered (including bonuses). So if an ICO sets the price of 1 ETH per 4,000 XYZ plus a 25% bonus (1,000 extra coins) and the price of Ethereum is currently $1,000, the USD value of that coin would be $0.20.
I usually tend to stay away from coins that cost more than $0.50 even if they have a lower total supply. Technically, if a coin costs, let’s say $1, and there are only 10 million of them, the actual value would be the same as a coin that costs $0.01 but has a 1 billion supply because the coin is 100x cheaper but also has a 100x higher supply.($1 x 10,000,000 = $10,000,000 marketcap while $0.01 x 1,000,000,000 = $10,000,000 marketcap as well).
But the reality is that your average buyer doesn’t know or care about these mechanics, so if he sees a coin that costs $0.01 he is much more likely to buy it instead of the one that costs $1, because he instinctively thinks it is cheaper even though there are a 100x less of the “expensive” coin on the market and therefore has the exact same value as the $0.01 coin!
Sometimes an ICO like ClearPoll comes along with a total supply of 9 million and an initial price of just $0.10 — it gave me a 9,000% return in just 2 months, mainly because of the crazy low supply and ICO price.
And even after taking all these considerations into account, it still comes down to the actual demand for the coin. One example of “breaking my own rules” was with the BitconnectX ICO which had a starting price of $50!!The only reason I bought that was because I know how many people are involved with Bitconnect and the supply was still relatively low. I’m not at all saying that Bitconnect is an awesome company but I know how supply and demand works, and if somebody can sell “pet rocks” for $4 a piece, well… Time will tell if my 3 BitconnectX tokens will soar to $500 soon enough.
The token economy can also include certain benefits for hodling the coin like masternodes and staking, airdrops after meeting certain criteria, discounts on the product itself, and so on.
________Following_
One word: Telegram. The vast majority of (legit) ICOs are active on Telegram and you’ll notice that I’ve referred to the platform several times in the article. I use Telegram as a kind of backdoor into a company’s support system, and so can you! It’s available as both a phone and a desktop app.One of the things that I find myself always doing is compile a small list — usually 2–3 critical questions — that I can’t find the answer to in the whitepaper, and ask an admin of the group directly. Usually the admins are also the developers or even the Chiefs of that company, and I’ve had the pleasure of speaking directly with several of the CEOs of the ICOs I’m planning to invest in before I actually do.
Most big ICOs usually have a public Telegram group with lots of people chatting every minute of the day plus another Announcement Channel with no chat. I find it manageable to always turn off notifications on the public group but keep them on for the Announcement Channel to make sure I don’t miss any important updates.
Telegram or any social following including Reddit, Facebook, Twitter, and even YouTube is also a great way to assess the demand for that token. One great example of this is Refereum which I will give you my personal link to, if you want to join => refereum.com/andreashauser. They recently hit 50,000 users which was the max possible amount in Telegram until Refereum asked them to change the cap to 75,000.Now, just 7 days later, they’ve reached the cap yet again with possibly several hundred thousand people just waiting to buy the coin on February 7 when the ICO launches. Again, remember to be polite in these groups and always DYOR before asking qustions like “When does it launch? When echange? When moon?” (in fact, don’t ever ask that last question!)
I personally wouldn’t trust Twitter and Facebook numbers too much since those can easily be bought and manipulated with.
Extra tips!
At the start of this article I mentioned that I’d throw in some extra tips in the end, so here we go:
Github & Clearify
- Github is a great platform where you can look up a company’s code depositories. This allows you to check the code that’s being developed or just see if there is any activity at all if you’re not a programmer. Some companies choose not to upload their progress here, though, so don’t shrug it off as a scam just because you can’t find them on Github.https://github.com/
- Clearify is a service that launched in January 2018 where companies can register their ICO contribution address to help prevent scams. In the case of many popular ICOs, scammers will create fake lookalike websites with a fake contribution address, or they can even hack into the real website’s backend and replace the official address with a fake one — potentially running away with hundreds of thousands if not millions of dollars worth of crypto.Always use Clearify to look up an ICO contribution address before you send your money, but keep in mind that far from all legit ICOs know about this service yet since it’s just 2 weeks old at the time of this writing.https://www.clearify.io/
And that’s pretty much it!
If you felt like I left anything out or if you want me to explain in further detail, please feel free to join our own private Telegram group here. Here you can also share your own tips and tricks in our network of serious ICO investors.
Remember to take responsibility for your own actions and never take anyone’s word for the truth when investing — no matter how excited they may seem. Always do your own research.
Thanks for reading!
Andreas
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ICO Investor’s Guide to the Galaxy was originally published in The Startup on Medium, where people are continuing the conversation by highlighting and responding to this story.
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