The opening of initial coin offerings (ICOs) creates a lot of investor interest netting millions of dollars in a relatively short period. For example, Bancor’s June 12, 2017 ICO raked in $147 million. Besides, other examples of multimillion dollars ICO’s include Basic Attention Token (BAT) and Aragon (ANT).
Nonetheless, market analysts have articulated their concerns over ICOs. Some analysts remark that increasing demand may lead to an ICO bubble burst. Besides, the underlying technology upon which these offerings rely on is still in its infancy which can adversely affect an ICO’s future tentative value.
Any investment decision depends on a comprehensive appraisal of its present and future potential. With this in mind, it is imperative that you thoroughly review any ICO offering. An ICO investment can provide you with spectacular profits, but losses can be monumental. A trend causing concern among market observers, regulators, and investors is the minimal information provided by companies holding ICOs.
Initial Steps For Investing In An ICO
First off, before investing in an ICO, it pays to conduct a thorough research of its offerings. Only by exercising insight can you build a good foundation for an ICO investment. Accordingly, below are a few tips to help you along the way:
First, read the ICO’s whitepaper: whitepapers typically contain technical information, but getting acquainted with information provided in this document is crucial when considering an ICO investment. By doing so, you will be in a better position to evaluate the soundness of the ICO offering.
Second, you need to review a company’s key personnel. Begin by asking how well qualified is the team behind the offer? The answer to this question may very well determine whether you are making a sound investment decision or not. Besides, when researching a company’s competency, assess who are its top executives, technology developers, and critical operations personnel.
You can obtain valuable information from online profiles of team members. In this vein, where team members lack credible online profiles, don’t hesitate, it is time to run.
Probe around the community: various channels exist through which you can get feedback on your concerns. For instance, you can learn a lot by using forum posts, emails, or Slack channels. While doing so, consider the responsiveness of the startup’s developers and the quality of its provided information.
Weigh Up The Opportunity
Ideally, you should commence with an evaluation of any digital currency immediately after collecting the relevant information. If you cannot understand the investment or where it fails to attract considerable interest from investors, just walk away. By doing so, you act by the advice of the renowned investor Warren Buffett.
He advises that you should only invest in what you know or can understand. Similarly, this principle is valid when it comes to investing in digital currency startups. For this reason, it is imperative that you ask several questions such as:
- What does the currency hope to accomplish?
- What gap does it seek to fill? The answer to this question will assist you in identifying the rationale for its existence as well as why it needs funding.
- How will the currency accomplish its goals? Beware of the existence of alternatives or previous attempts of a similar idea.
- What is the magnitude or enormity of the task the currency seeks to rectify? In doing so, you will get a perspective of the currency’s market potential? An excellent example is BitCoin which sought to create a decentralized banking system as well as a new currency. A digital currency with such potential is worthy of your consideration.
- How much of the digital currency’s value is dependent on future market fluctuations? And how much of its price is pegged to existing value?
The questions highlighted above are useful variables in evaluating a digital currency’s unique market potential as well as its competition. In some instances, overlapping occurs when multiple players attempt to solve a single problem. BitCoin, Cloak, Monero, and Zcash were primarily designed to offer users anonymity. By the time of writing, Monero enjoys dominance in privacy oriented digital currency transactions with a market value of $700 million whereas Zcash’s cap is about $420 million.
Getting Ready For The ICO
After comprehensive research, your next step is getting ready for the ICO. Remember that no two ICOs are similar; each is unique in its own way. Some ICOs have a fixed amount of coins or tokens on sale which when reached terminate the deal. This is the reason why you need to know:
- What day is the ICO taking place?
- What amount of tokens is available during the offering?
- What percentage of tokens will the ICO’s owner hold?
- Does each token’s value remain constant or does it fluctuate during a sale?
- How do you get in touch with the ICO company?
- Deciding: Ether or BitCoin?
Caveat! Be aware that you need BitCoin or Ether to participate in an ICO. In case you do not have one, simply sign up for an account with either Coinbase or Kraken. To transfer funds, you need to link your bank account or credit card to your BitCoin or Ether account. Still, you should remember that fund transfers can take several days, so allow sufficient time for this process to take place. You are ready to participate in an ICO as soon as funds are available in your BitCoin or Ether account.
BitCoin/Ether Wallet Transfers
After successfully transferring your funds, your next step is depositing purchased bitcoins or ether tokens in a digital wallet. Avoid using resources stored in an exchange as you can quickly lose your investment. As soon as you move funds to a wallet that you control, you automatically own the digital tokens that comprise its private keys.
Be sure to get a digital wallet that meets industry approved standards for seamless participation in any ICO. Most digital tokens out there are compliant with the ERC20 standard developed for Ethereum tokens. As a result, you need a compliant digital wallet for purchasing Ethereum based tokens. Examples of wallets compliant with the ERC20 standard include ANT, BAT, and hardware wallets such as Ledger Nano S, Mist, and MyEtherWallet.
During The ICO
As soon as you have digital currency in your wallet, sign up at the crowdfunding page of the ICO’s company or project. Some ICO offerings may require that you sign up with an ICO platform such as TokenMarket which acts as both an ICO exchange and trading information source.
How To Get Around During An ICO
Although most ICOs are hosted on the Ethereum network, most ICOs accept bitcoins, ether tokens, or both as mediums of payment. ANT and BAT distributing ICOs typically take place on the Ethereum platform. The websites of the associated project or company are first class sources of detailed information regarding a specific ICO.
Sending Ether Tokens
Parity is a popular wallet for purchasing Ethereum tokens within a predetermined time slot. With ICO sales happening at rapid speeds, using a Parity wallet expedites the payment process as well as gaining you specific advantages in early deals. For these reasons, you need to download, install, and master Parity’s features.
With Parity, investors can schedule transfers to occur after a specified block number or at a particular duration. Correctly setting up a schedule obviates the need for your presence at a computer during transactions. Even so, Parity must be running on your machine for the deal to take place. To accomplish a purchase, you need to know an ICO’s Gas Limit. All Ethereum based sales have an associated gas expense which consists of fees paid for using the Ethereum network.
Importance Of Gas Cost
Parity has an inbuilt feature that allows you to adjust Ethereum network’s gas limits. Setting this limit too low can prevent a transaction from occurring. On the other hand, setting a gas limit far above recommended limits can result in miners prioritizing operation friendly blocks.
Early Transaction Signing
For those in possession of a MyEtherWallet, a popular technique to use during an ICO is to sign your transactions early. To do so, select the “Send Ether & Tokens” feature after gaining access to your wallet and provide the following details:
- The ICOs’ Contract address
- The ether amount to send
- Transaction gas limit and;
- Any other ICO relevant information
After providing the above details, simply click on the “Generate Transaction” command. As soon as the “Signed Transaction” field gets populated with data, copy this information, and save it in an accessible location. After doing so, just wait for the ICO to begin to broadcast your signed transaction on Etherscan.
Distributing And Storing Your Tokens
Your digital tokens will be issued to you after an ICO terminates. For this reason, you need to determine the best way to securely store your tokens. One way to do so is by saving your tokens in an online wallet. However, this exposes your tokens to security vulnerabilities. Alternatively, you can opt to store your digital currency offline, known as cold storage.
Hardware wallets are a safe and secure way of storing your digital money away from hackers, viruses, and malicious software. Saving your purchased digital tokens is easy, simply plug in the hardware wallet into your machine and copy the private keys to your hardware wallet for safekeeping. After copying, disconnect the wallet from your computer and you are done safely storing your cryptocurrency.
For additional security features, you can deposit your hardware wallet in a fireproof safe or a rented deposit box.
Initial Coin Offering Investments After Thoughts
Although ICOs involve significant amounts of risks, they can let you reap great rewards. Before engaging in an ICO, you need to research an offer just like any other investment thoroughly. With digital currencies transforming perceptions regarding conventional banking and financial transactions, a majority consider these currencies the future.
The importance of selecting the right investment opportunities cannot be overstated. You stand a chance to reap big rewards from investment in ICOs and digital currencies. Need to learn more about current and upcoming ICOs?
Point your browser to our initial coins offering page, then sign up to receive our e-newsletter on the ICOs you follow.
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