Cash grab or legit ICO? So you have some extra cash and are looking to spend it in one of the numerous ICOs that are in the crypto landscape right now. How do you know if an ICO is going to drive Return on Investment or is just a quick cash grab from the team?
The amount of ICOs that are flooding the ether right now are immense. ICOs are a hot topic and many people speculate that if the amounts raised are any indicator, we are in an ICO bubble. Sadly, the downside is that opportunistic people will try to cash big on the investor seeking to support valuable projects and secure gains.
Cash grab or legit?
As with any due diligence, first start looking at the the information the team provides themselves. Read the white paper and decide if there is enough detail and research. Or is it just speculation and a nice idea? If they already have a working prototype or demo, or customers vouching to use their services, even better.
Also look at the business model: why is blockchain THE solution for the problem they are trying to solve? Some teams just use blockchain technology because they heard it’s an easy way to raise capital via ICO.
Likewise, look at the team behind the project. If they are experts in the field of the problem they are trying to solve, all the better. Blockchain products need specialized developers for setting up smart contracts and other related things, front-end coders will have a hard time putting together the product. Are the advisors tied to the project people with a good track record and known in the crypto space? If your product is backed by Vitalik Buterin, the investments you can expect just grew tenfold.
Then, inspect their web presence. Do they have a website and social media? Great, but those things are fairly easy to put together. Look at things like links to other known and reputable websites talking about the product (if they are non-paid articles, even better!), how active founders have been on social media before ICO started, and Linkedin profiles of the team members.
If it is a product that specifically caters to the crypto investor community, like trading tools or exchanges, backtrack the posts of the founders or team within communities like Bitcointalk or Slack/Telegram groups, to get a feel of how trusted these people are within the community.
Don’t believe the hype.
Next up marketing: don’t believe the hype. If a company is spending big on marketing outside of normal channels, you can bet they want to grab as much money as they can. Promoting your ICO on Twitter, Facebook, Reddit and Bitcointalk is expected, but everything that falls outside of that is subject to more inspection. Examples of this are EOS having ads on taxis in New York or the boxer Mayweather promoting the Stox ICO.
Lastly, if it sounds too good to be true, it probably is. Use common sense and keep an ear open for what your other fellow investors are saying in your crypto communities like Reddit and Coindesk. More eyes doing due diligence means small details that are overlooked suddenly come to light. Especially when it comes to things like the fine print in Terms and Conditions (who reads those, right?). EOS for example has stated in their T&C that they are not even responsible to ship the product!
As always, the key is to be conservative by not jumping on the bandwagon too soon, doing your own due diligence and research, and tracking the team’s communication over time. Happy investing!
Disclaimer:the author does not promote any of the exchanges or ICOs mentioned in the article as better than others. Do your own research and pick wisely!.