Here are some tips to help you Participate in an ICO.
Do Your Research!
Read the Whitepaper, Search for Technical Details on Reddit (i.e. Github) and then Compare it with Other Coins/Tokens that are Listed on Exchanges. Don’t just use a simple Google search either; make sure you read all of their white papers, look at each technical document and compare this information with other blockchain start-ups that have performed successful Initial Coin Offerings – if there are any similarities, then your chosen token will probably rise in value over time as well. Don’t get too excited over projects that offer very high returns either; chances are that their business models have not been thoroughly tested yet and they haven’t had the chance to prove themselves as reliable companies within this industry.
Look for Cryptocurrency Investors on Twitter, Reddit, and YouTube
There are TONS of articles about blockchain technology being published online; if you think this is too much information to sift through then use social media (i.e. search for various crypto influencers). Most people in the cryptocurrency ecosystem like to share interesting links related to their field of expertise – and since most token creators try to spread awareness for their projects by interacting with various members of the community (on Reddit, Slack or Twitter), keep an eye out for anyone who’s tweeted about these types of offerings before…it doesn’t hurt to start a conversation with them.
Make Sure You Are Able to Afford the Initial Coin Offering Price
Just because you “want” to buy into this ICO doesn’t mean that it’s smart to invest $10,000+ in tokens if you don’t have a lot of money – unless you know for certain that your investment will definitely yield returns, make sure your funds are spread out across multiple projects and never put too much of your savings into any one offering. I’ve seen many people purchase hundreds or thousands of coins/tokens during crowdsales only to realize months later that they could’ve purchased more coins/tokens with their initial investment (if they decided against investing in that particular project).
Understand How Token/Coin Distribution Works
When someone releases a new cryptocurrency token, they’ll usually do it by selling their coins to anyone who’s interested. Sometimes these offerings will be done through Initial Coin Offerings (ICOs) while other times the tokens are distributed in exchange for goods and services – regardless of which type of crowdsale you participate in, everyone should make sure that they understand how this distribution works so that there aren’t any surprises later on.
If you’re participating in an ICO then chances are your chosen project is using smart contracts to establish rules about how (and when) you can spend/exchange these coins/tokens; if this is not the case then keep reading because I’ll explain more about this topic below.
When you receive coins/tokens through an Initial Coin Offering then your ownership of them is usually defined by a smart contract (i.e. the rules that govern how you can exchange these tokens). For example, if someone releases 10 million tokens and only allows investors to buy 100,000 tokens during their ICO then this means that only 1% of all coins are available for public sale; if they sell out within a few hours then chances are good that early members will profit by selling their stake at a higher price than people who joined later on…and so on).
Regardless of whether or not your chosen token was released during an ICO, it’s important to understand what the “total” supply is going to be so that you know for certain whether or not there will be any additional coins/tokens released in the future. If this isn’t clear then ask someone from the community who is familiar with these offerings to clarify this information for you – because if a company plans on selling more tokens (e.g. through an Airdrop) then these new coins/tokens could potentially compete with your existing holding when they are introduced into the market…and since most people don’t like the idea of competing against their own investments, it’s important to do everything possible to avoid being hurt in this way.
Understand How Regulatory Oversight Works
There are multiple countries that have their own rules regarding blockchain technology and exchanges; however, the majority of countries have not yet established their own rules and regulations for cryptocurrency-related companies, nor is there any indication as of now that they are planning to do so in the near future.
If you live in a country where this oversight has been established then I highly recommend that you always check with your local regulatory agency to see if any specific guidelines or policies exist – while some (or even most) tokens might still be fine under these new laws, there’s no doubt that many individuals will want to avoid making investments into certain offerings because they’ll either be outlawed entirely or ruled illegal during a later stage in this process.
As an example, here are some of the things I would look up before investing into Token A: Is Token A legal in my country? (Here’s a tool to help answer that question)
Is Token A compliant with any existing regulations within my country? Are there ANY indications that the government could ban or outlaw this token at any time in the future? If so, can I/we stop it from happening? Does anyone have an idea where I can find reliable information detailing how these new laws/regulations will be enforced?
If you are not required to check with your local regulatory agency then I still recommend doing all of these things anyway because you never know if Token A may be “banned” on an exchange starting tomorrow…or perhaps someone decides to start listing new tokens and they refuse to list yours regardless of how much community support it has…and so on.
Understand What Role the Exchange Plays in Your Investment
There is a good chance that you will want to choose an exchange where your tokens can be deposited and exchanged for other coins/tokens, however there are many more factors than just that one!
Does the exchange have any restrictions regarding which countries are allowed to use their platform? Does the exchange list many Ethereum based tokens or do most of them accept Bitcoin instead? Are they located outside of my country so that I don’t have to pay taxes when I exchange my currency for Token A? Does this exchange charge high fees (i.e. 0 – 5% per transaction) or even take fees at all? Are the people running this company known in the cryptocurrency community? Do their names appear on LinkedIn and/or can I find old forum posts that mention them? What is the average trading volume of Token A on this exchange in comparison to other exchanges?
When All Else Fails
If it sounds too good to be true then there’s a very large possibility that it isn’t an opportunity worth pursuing! This is one of those times where “curiosity killed the cat” because even though you may not know who ran a specific ICO or came up with an idea for a new token/platform, others WILL know and if they’re making something that seems a bit fishy then you should probably be extra weary of it.
It’s very simple: why do people care about the company behind the ICO? For me personally, I always search for anything related to the team on LinkedIn. If I can’t find any information there then I’ll look at their YouTube channel (if they have one) or try to find some old forum posts that mention them. If all else fails, I’ll simply ask my friends in the crypto community what they’ve heard about this specific project – I consider online reputation management as one of the most important aspects of token investment because there are so many opportunities out there for scammers, thieves and con artists.
So, what does all of this mean? In a nutshell, if anything sounds too good to be true then it probably is! If you’re going to invest into something then you should always do your own due diligence prior to doing so. There’s no excuse for naivety or carelessness when it comes to investment because at the end of the day you are willingly putting your money into something that could potentially make you more money than whatever job(s) you have been working on up until this point in time…however there are also a lot of scammy projects out there as well which WILL steal your money and make you regret ever getting involved!
Do I think that the “cryptocurrency community” is as secure as Fort Knox? No…and there are some fantastic articles on Medium that go into more detail regarding this subject, but in this section, I just wanted to emphasize the importance of doing research/due diligence before you invest into any token. If anything looks too good to be true then it probably is , so if it seems like something worth investing in then please take your time and do a lot of digging around first.
Do Your Own Research
Since I’ve already covered why researching a coin should always be done prior to buying any amount of their tokens or coins (see above), this section will focus specifically on what kinds of information you should be looking at.
There are several other “wisdom of the crowds” systems out there such as wisdomofcrowds .com and icobench , but I personally prefer to do my research by following their social media accounts and reading most/all of their Bitcointalk thread.
While doing your own research is a great way to find projects that could potentially have awesome ROI s, it can also lead you down some very nasty roads when it comes to falling for scams or scams that are more crafty than others. The reason why I feel like this community needs even MORE due diligence is because several scams recently were able to raise millions of dollars in ICO funding (i.e. the recent ATM scam where they raised $375,000 worth of ETH ).
It sounds funny for me to say this, but please PLEASE use common sense when it comes to cryptocurrency investing – if you’re not feeling like something is safe then don’t put your money into it. If I had any sort of inclination that a project was sketchy then I would either wait until later on or just invest smaller amounts. I have never invested more than $100 into an ICO and while this may be pointless for some coins (such as Ethereum), I will keep doing this so that my money doesn’t go into complete strangers’ hands.
