Startups have raised around $5.6 billion via ICOs during 2017, according to a recent report published by Business Insider. In 2018, the market witnessed a huge boom in projects and startups raising capital via issuing their own cryptocurrencies. While the total market capitalization of cryptocurrencies is currently valued around $254 billion, in 2017 it exceeded $600 billion. This attracted the attention of thousands of traders from all parts of the globe and brought many new investors to the ICO market. Throughout this simple guide, we will help you understand what ICOs are and how to determine which are the best ICOs for you, should you choose to invest.
What exactly is an ICO?An Initial Coin Offering (ICO) represents a means of seed funding and crowdfunding through the issuance of a brand new cryptocurrency or cryptographic token. These tokens, issued mainly via Ethereum’s blockchain, are sold to investors in order to raise capital for a particular startup or project. There are currently more than 1,500 coins are traded on cryptocurrency exchanges. Not all cryptocurrencies or ICO tokens are issued on new blockchains. In fact, most of them are created using other well-established blockchains. Many ICO crowdsales rely on creating ERC-20 tokens that function on Ethereum’s blockchain.
Benefits of ICO crowdfundingDemocratic funding: ICOs enable projects to bypass the conventional means fundraising, such as seeking loans from banks and funds from venture capitalists. Such traditional funding usually requires a large amount of time, as well as a large number of personnel and other resources. Via an ICO, anyone can advertise their project to a large community of potential investors. Anyone can be an investor and choose to purchase the project’s tokens in order to fund it. Often, this means that the investor can enjoy high returns in a relatively short period of time when the ICO’s tokens are listed on cryptocurrency exchanges for trading. Huge profit potential: The price of many cryptocurrencies has skyrocketed, rising from cents to dollars in only a few months. Due to this, many investors are eager to invest in the next booming ICO coin. Even though some ICO coins have no real technical potential, the large number of speculators and investors stepping in to bet on high returns. This has boosted prices astronomically during 2017. The following steps will help you to understand the steps required to invest in an ICO.
Step 1 - Researching upcoming ICO coin listsIt is critical for any investor to thoroughly research upcoming ICO crowdsales. There are several websites that list upcoming, ongoing, and completed ICO projects. Sometimes, it is quite profitable to invest in ongoing ICOs, so keep an eye on those too. Cointelligence offers one of the best portals for monitoring Initial Coin Offerings' sites. Whitelist ICOs are ICOs that require investors to register prior to the launch of the crowdsale to be able to buy the ICO’s token. Whitelist ICOs are potentially more profitable than ICOs that don’t involve a whitelist. There are other websites and portals that list upcoming, ongoing, and even completed ICOs. Some of these sites offer valuable ICO statistics. These sites include:
- Cointelligence's ICO List
- Coin Schedule
- ICO Ratings
- ICO List
- ICO Watchlist
- Top ICO List
- Various subreddits on Reddit including r/cryptocurrency r/ethtrader r/ico and r/icocrypto
- Bitcointalk Forum's announcement section
- Specialized channels on Slack, e.g. Coinfund
Step 2: Exercising Due DiligenceIt is important for any investor to thoroughly research the token’s features in order to ascertain whether the ICO represents a potentially profitable business opportunity. There are numerous key points that have to be considered to properly assess the potential of an ICO project. The following questions are key questions that will allow any investor to begin to vet an ICO:
- Does the project clearly present a solution to a current problem?
- Does the project’s team offer a reasonable roadmap?
- If the ICO involves a new blockchain, does the coin’s blockchain protocol represent a clone of another altcoin?
- Is the ICO’s whitepaper properly written? Is it technically sound? Does it include any grammatical errors? Does it include any false or inaccurate technical data?
- Any investor can answer these questions even if they don’t have any technical background by researching the technical specifications on Github, Bitcointalk.org, and Reddit.
- Crush Crypto: A website specializing in the analysis of ICOs through thorough fundamental analysis.
- Reddit: Certain subreddits include ICO reviews presented by experienced redditors, such as r/Cryptocurrency, r/ico, r/icocrypto, and r/ethtrader.