Cryptocurrencies are a hot topic across media at the moment. While there is a lot of information out there about cryptocurrencies and the potential for investments, it can be difficult to sort through all the noise. A significant aspect of the cryptocurrency phase is the Initial Coin Offering (ICO). This is due to an increasing number of cryptocurrencies looking at ICOs as a source of crowdfunding their venture. With a sustained level of interest in cryptocurrencies, and a demand from the public to find investment opportunities within these currencies, ICOs can be lucrative to coin companies and to the public at large.
There are a number of factors that you should be aware of before putting your money behind an ICO. With so many cryptocurrencies emerging on to the market, it can become confusing to establish the facts. Just as with any investment, you cannot be sure that a coin will be successful after investing in an ICO. However, if you are armed with the analytical capabilities to investigate deeper into these cryptocurrencies, you will be able to arrive at a wiser decision.
1. Solving a Problem
Bitcoin, possibly the most famous of the cryptocurrencies, gained such attention because it solved a problem. Prior the Bitcoin emerging on to the market a decade ago, nobody had uncovered the method of creating a digital currency securely. This is because digital currencies required a trusted third party to accurately account for all transactions. Bitcoin fixed this problem by establishing the decentralized system of blockchain. In solving that problem, Bitcoin has been able to grow to its current strength. When investing in an ICO, assess what the coin is trying to achieve. A cryptocurrency that is providing a solution to a problem is certainly worthwhile investigating.
2. Who is Behind It?
Just as with any business, you need to assess who the people behind the cryptocurrency are. As an investor, you are putting your money behind the team as much as you are putting your money behind the cryptocurrency. There are a number of credentials that you should look out for in a team that is promoting an ICO.
Firstly, you need a team who have the capabilities to mine the coins that you are investing. Cryptocurrency mining requires a significant degree of technological power and investment. The people behind the currency should have the capabilities to run such an operation.
Secondly, cryptocurrencies, while unique, operating in a similar function of traditional currency. They are traded on an exchange, their value rises and falls, and they move in trends. While a company might have the technological capabilities to run a cryptocurrency mining facility, they may not necessarily have the abilities to manage a currency. When investigating an ICO in which you should invest, make sure someone on the team has experience in trading currencies.
Thirdly, will the coin team be able to market their cryptocurrency? An ICO can only be successful if it is marketed correctly. While its great to be an early investor in a successful venture, you don’t want to be the only investor coming to the table. Cryptocurrencies, operating in the digital space, need a significant degree of marketing to be a success. As a result, the team behind the ICO need to be able to market their product sufficiently.
3. Look at the Fine Print
Attractive advertising campaigns, lucrative offerings and promises of riches can draw your attention, but it is always important to dig deeper. Every cryptocurrency should produce a white paper outlining what they plan to do, and how they plan to achieve it. While it might not be the most stimulating read of your entire life, within this document is some crucial information.
Take some time to go through the whitepaper before investing in an ICO. You could glean some valuable information that will allow you make a wiser decision. Using the analytic reasoning from the previous two points, you should be able to decipher whether the cryptocurrency company has the sufficient capabilities. It is also important to understand the professionalism of the company. Some cryptocurrencies promote themselves in a gimmicky fashion. While this oftentimes amusing, you must also remember that you are investing in a financial industry and that you can trust the company to carry out their business in a professional manner.
Ultimately, the investing in an ICO can be a lucrative and exciting venture. Cryptocurrencies are still in their infancy, and there is no limit to how far they can grow. Just like any other profitable industry, there will be those who will attempt to make money quickly without having the correct resources or team to develop their product. When investing in an ICO, you need to be armed with the correct tools to make the best choice for you.