It's important to study ICOs before investing so that you can find the best opportunities. Even if part of the reason for participating in an ICO is because you like the concept, you will be looking for a return on investment (ROI) as an investor.
Analyze ICOs before making a decision.
Every year, thousands of initial coin offerings (ICOs) are introduced. Some of them are excellent ideas, but they do not succeed. As a consequence, investing is a serious decision. Making an educated choice is the most critical part of investing. There may be a number of compelling reasons to invest in an ICO. There will be several persuasive reasons to refrain from investing. It's crucial to do your own research to determine whether or not an ICO is appropriate for your own investment.
Why is it important to look into Initial Coin Offerings (ICOs)?
When you participate in an ICO and purchase any of its coins, you are pleased with your decision. Investors who are reasonable expect that their investments will rise in value at some stage in the future.
If you think something will depreciate in value in the short term but will rise in value in the long run, the best option is to hold off on buying until the asset depreciates in value, then buy at a lower price and get a better return.
If you see short-term profits but assume the long-term future is grim, the prudent investment option will be to buy the asset now and sell it later for a profit on the price rise in the short term.
Unfortunately, things aren't as straightforward as that. Many investors are irrational, and the market is irrational and highly volatile. Nobody would ever be able to correctly forecast the ebbs and flows of the economy with 100% precision and certainty, no matter how hard they try. Some people can establish guru methodologies that enable them to make better decisions and achieve better results than others, but no one is perfect, and many people fall far short.
Because of the volatile existence of the cryptocurrency market and the ongoing influx of new blockchain ventures, systematically and efficiently analysing ICOs has become nearly impossible.
However, there are four main fundamentals you can examine to help you narrow down your options or assess an ICO you may be interested in.
Team First
What is the ICO's team like? Without a good base and anyone to carry it out, a brilliant idea will die. Examine the team and their track record from a number of different outlets. The ICO's team should be made up of genuine, trustworthy individuals. A team full of seasoned high achievers is a big bonus, but team members working under aliases can not be trusted.
Blockchain Necessity
The blockchain is at the core of any effective ICO. A worthy candidate should have a sound, compelling reason for using blockchain technology, as well as a strategy for making the most of it. If an ICO isn't using blockchain technology for anything other than the development of its tokens, that's a huge red flag.
Even if an ICO uses blockchain technology for more than just making tokens, the need should be evident. If an emerging technology, such as a secure database or electronic cash transfer, will work better, you can inquire as to why it isn't being used.
Blockchain technology is strong and allows previously inaccessible functionality; however, that functionality exists in a very limited niche, and attempting to use it where it is not necessary would cause a project's funding to dwindle.
Sound Economics
When evaluating ICOs, keep supply and demand in mind. What would add value to the coins/tokens? Is the token's value proposition linked to providing low-cost, accessible access to a common product or service? If the related token is costly due to speculation, the product or service would no longer be inexpensive, and vice versa. This is yet another big red flag.
Responsible Decision Making
What will the funds raised by the ICO be used for? Will a good ICO give them the boost they need to get their company off the ground? Is the exit strategy a reward for the team that began the project?
Examine the planned use of any proceeds. The rest of the money should be put back into the business. Never put your faith in an ICO that spends more time promoting than developing and delivering value. A fast estimate would always reveal that raising $100 million, producing a $10 million product, and then selling it to a market share worth less than $1 million would result in a bad outcome.
