Last updated on March 22nd, 2023 at 08:35 am
Introduction
Blockchain technology and cryptocurrency have been one of the most popular and ongoing topics in the world of technology and investment. Where blockchain technology is developing at a rapid pace, so is the value of cryptocurrency and its uses.
Apart from just investment, blockchain and cryptocurrency have offered many new applications for the business world.
Many new companies and projects have started asking for funds from investors in return for crypto coins created by them. One of the ways through which the companies request funding in return for their own crypto is called Ico Investing.
Suggested Reading: Uses of Blockchain>>
What is ICO?
An ICO or Initial Coin Offering is similar to an IPO or Initial Public Offering. However, instead of shares and stocks, the companies provide cryptocurrency or crypto coins to the investors.
Any new company that is looking to expand and raise funds can create a new coin, app, or service and launch an ICO.
ICO has been a popular way for companies to raise funds for products and services that are usually related to cryptocurrency.
An investor can easily do ICO Investing by purchasing established digital currency or coins. Since it is mostly unregulated, it has become a great way for companies and individual developers to raise funds.
However, for an investor, it would mean a high degree of caution and diligence, when researching and investing in them.
To know more about What are ICOs, check this article.
Tips to invest in an ICO
Now ICOs can be a little tricky. Since there are not many regulations involved in it, there have been reports of many ICOs being a scam. People have invested their hard-earned money into it, just to be scammed.
However, it does not mean there are no genuine ICOs. Many popular ICO has helped investors gain a significant return from their initial investment.
It is why picking the right ICO is the key to making the right investment. There are many ways through which you can invest in the right ICO. But before you think of investing in any company through an ICO, there are a few things that you should follow and keep in mind.
1. Do your own research
As a crypto investor, it becomes very important for you to check all the details related to it. The history of the company, the developer, the aim of the company, its association with others, and a lot more.
Therefore, before investing in an ICO, it becomes important for any investor to research and do the required homework about the company.
Crypto can be a really tricky investment and go from high to low at any point in time. One of the most important details that you should check before investing in an ICO is the historical data of the company and the number of projects they have already been working on.
It will give you a good enough idea of whether the undertakings by the company have performed well in the past and are expected to do the same in the future.
You can start with the white paper provided by the company before the ICO, which confirms the details as to why they require funding and what they will do with it, and what they will offer you in return.
Although, it should not be the only source of your research and it would be better to research through other sources as well. If the white paper does not have the details about the token’s code, or security feature, then it is a red flag. You should not invest in any such ICO.
2. Go for disruptive concepts
Before you Invest in ICO, you must be assured about what the company is offering in terms of service or product. Most of the ICOs are just a service similar to what is already in the market.
They might make it cheaper, and faster than the existing service. But investment in such an ICO may not reap profits for a long time unless they have something unique on offer.
Search around for the ICOs that are offering something unique that is not available in the market. A concept that can be disruptive in the market, has more chance of success in the future.
The products and services offered through an ICO should address a real need area, using new solutions. Look behind the concepts that truly seek to disrupt the existing market with something new. This would help you to make an investment that would reap benefits for a longer time in the future.
3. Target Market
You can also select an ICO based on the market that the product and services the company is going to target.
It is important to evaluate the company, technology, product, and services in the context of the target market.
In the end, the investment that you put into the token would be evaluated by the target market and its use in it. Knowing about the target market will help you to understand the advantages and challenges that the product would face in the market.
The target market might already be filled with many competitors and big players. It will help you to evaluate the future performance of the company or how it will perform in it.
For example, blockchain technology in the healthcare sector is on the boom. It can help drug manufacturers, healthcare service providers, track, record keeping, and a lot more. Therefore, investing in an ICO which targets the healthcare market can provide good profits for your investment.
4. Evaluate the technology
Evaluating the technology is one of the key factors that would help you invest in the right ICO. We all know that blockchain technology is evolving right now as we speak. Due to this many different segments and applications are being created on the platform.
Once you select an ICO, you need to see if the venture has proof of the concept and a pilot case study. One with it is a much safer bet than any other company offering ICO. One with these details is already available for evaluation and testing.
Investors can test out the tech and see how it would work for the target users. understanding the product or services firsthand would help to evaluate the ICO in the best possible manner.
5. The use of tokens or coins
Investors can purchase tokens from the company in an ICO, which is one way of raising funds. However, what is the use of tokens in Ico investing, and how they can be used is an important question.
Aside from functioning as a form of security, many companies provide additional privileges to investors through tokens.
These tokens can be used on the platform or an ecosystem to buy and sell services. For example, FileCoin offers a decentralized file storage system. Users can spare computing resources and rent them out for more tokens. The same tokens can be exchanged for fiat currency or other crypto coins.
Many companies also allow investors to use the same token and buy various services from their websites with special privileges. Therefore, you must have an idea of what the token can be used for.
6. Register for an ICO
Once you have listed down the ICO which seems to be from a genuine company, it’s time to register. It is a much better idea for ICO Investing to register for a pre-ICO list that can be easily searched for.
Pre-registering in advance would include a bit of paperwork, but is totally worth the time. Various crypto-focused websites will provide you with a list of the upcoming ICOs.
Each ICO has a different type of registration process. Make sure to poke around and check for the appropriate procedure to register.
7. Set aside the money for payment
Now you will have to be prepared for the actual payment when the ICO takes place. It would be a great option to save and keep a certain amount of money aside for it. It can be in the form of fiat currency, dollars, or crypto. Most of the ICOs easily accept Either Bitcoin or Ethereum or Binance Coin as the mode of payment.
Many other ICOs also support other types of crypto, which will be confirmed before the actual ICO takes place. So make sure that you either have money or crypto standing in your wallet.
Most of the ICOs accept Ethereum or Binance Coin (BNB) as a form of payment. So if you have it in your digital wallet, the investment will be easier.
However, it is not the only way the companies accept payment for their cryptocurrency. They also offer an exchange of crypto tokens for their tokens.
It would majorly depend from company to company. If it is available, you will be provided with the exchange procedures by the company beforehand.
8. Store the ICO purchase
After you have completed a purchase of a crypto token in the ICO, it will also be available for purchase in the market. Once it is available in the market, you can also buy them through an exchange or broker. The only catch is to find an exchange that trades the tokens, after which you can save them in the digital wallet.
Once you have invested in the ICO through Ico Investing, your new coins will directly go into your crypto wallets like Metamask or Trust wallet (You can read Metamask Wallet Vs Trust Wallet here). From there on, the investors will have to rely on the price of the tokens in the market as they become available for the public to trade.
Unlike IPO there is no lock-up period for the investors to sell their tokens from a digital wallet. However, you can search around for news related to your ICO and check the price in the market before making a decision to sell it from the wallet.
9. Understand the risk in ICO Investing
ICO investing might be a great way to invest in projects based on blockchain technology but is not free from risks. Unlike an IPO, ICO Investing has very few rules and regulations in place. Due to this, it allows almost anyone to launch their ICO. Many times such ICO has also been identified as a scam by the court and other authorities.
It is why it is important for anyone to understand that investing in ICO can be risky and can even lead to loss.
However, with proper research, the chance of a scam and loss would reduce drastically. Therefore, only invest spare money into it and do not invest all your savings.
Verdict
Here are some of the best tips for Ico Investing, that can be followed to improvising your chances of profits.
Make sure that you do not invest in just any ICO, before researching about them.
Also, it would be better to understand more about blockchain technology beforehand. It would help you to understand the application and services offered by the companies.
