The ICO market has not yet opened to its full potential. Investors are storming the exchanges, buying bitcoins and altcoins. Many of them are inexperienced. The volatility in trading doesn’t even compare to the futures and options market. But all indications are that soon buying tokens from startups will become no less profitable than investing in cryptocurrencies.
Evaluating the prospects of ICOs
The first step for a beginning investor in this market is to evaluate projects offering to buy their tokens. So far, there is no infrastructure for independent and professional asset valuation in this sector. Investors have to rely on themselves. To learn how to make money on ICOs and not go into deficit, you will first need to invest in more than one loss-making project.
When choosing an ICO to invest in, you should pay attention to the development team. To place tokens, you do not need to have great resources and technical skills. The market is not regulated by the state in any way, unlike IPOs, fraud is rampant.
Prospective ICOs account for less than 10% of the total share.
If in the development team will be famous people who have previously worked on other startups, it greatly reduces the risk of losing money. It is undesirable to invest in projects of people who have no career history and achievements. Particular attention in the analysis should be paid to the personality of the founder of the company. When Bredan Eich, former CEO and founder of Mozilla, conducted the ICO of his new project, it took him only 30 seconds to raise money.
An important metric in choosing a project is its liquidity. How easy it will be to sell to intermediaries and consumers. People who know how to make money from ICOs recommend investing in new technology.
It is better to invest in tokens, which will not have a material backing. Otherwise it is not clear why they will grow in value. Unlike stocks, which pay dividends and give holders corporate rights, company tokens give access to services or products at a discount. Tangible asset-backed tokens are unlikely to increase in value because they are not backed by in-demand new technology, but by ordinary production resources.
So, the main points when investing are:
- The team;
- leader of the developers;
- liquidity of the idea.
The difference with earnings from conventional cryptocurrencies
Bitcoin, ether and other cryptocurrencies are popular assets for investment. They are easy to buy, and the rapid growth of market capitalization even allows you to earn something. About 800 cryptocurrencies have been developed so far. Most altcoins are of no use to anyone, they will never interest an investor again. But even if you don’t risk investing in new altcoins and build a portfolio of proven currencies, market cycles coupled with general market nervousness will quickly turn capital into nothing.
When investing in tokens, an investor looks first of all at the project. He can at least roughly guess whether it will be successful or not. No one knows what the price of a new altcoin will be in six months, and it is difficult to make even a rough prediction due to market volatility. If, however, the project for which money is being raised has a clear structure and achievable goals, the likelihood of success is realistic to predict.
Investing in tokens through ETH
At the moment, there are specialized platforms through which developers conduct the initial placement of their tokens. It is convenient to do this through the Ethereum platform.
Initial placement, which is carried out on the Ethereum platform, is carried out thanks to the Smart-contract technology. It is a protocol that exchanges money for services and goods without the participation of third parties. All the user has to do is transfer currency. This reduces costs and helps achieve transparency between the investor and the team.
With the prospect of project development, it is better to keep tokens until the last moment. At some ICOs the growth of their value exceeded 50,000%.
Thus, companies offering ICOs are easy to find, but it is hard to choose a promising project. Most of the initial offerings turn out to be a failure for investors, the remaining few percent bring a profit of thousands of percent. A lot of tokens are sold through the Ethereum platform, where they can be purchased for the corresponding cryptocurrency.