How to Evaluate ICOs

dr.Gachet

dr.Gachet

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Jun 18, 2018
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There is a huge number of ICOs out there, and each of them is promising enormous returns and useful perks for potential investors. Here is a compiled list of questions you should gather information on when performing your market research. These questions apply in both situations — deciding on an ICO to participate in or on an already established coin in the market.

  • Does the coin have a clear objective? A coin needs to clearly state its purpose since not all coins are meant to act like a traditional currency

  • Does it solve a real problem or have a strong use? The more common a problem or greater the impact of the problem the coin solves, the better value the coin will have. If the coin is the first of it’s kind and has a strong use, then it will have a strong advantage over the competition.
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  • Is the info provided full of fluff? When you do your research, can you get to the facts or is it full of hype?The more marketing jargon designed to sell you typically means you should probably stay away. If you can only find a website or landing page, you should avoid this opportunity.

  • How does the Whitepaper read? Is it well written and structured? Does it handle well against experts’ opinions? Does it explain the technology in depth?The stronger the white paper, the more confidence potential investors will have, and better the coin will perform in the market.

  • Who is backing the project? If the project was and/or is still backed by prominent investors, then the coin will appear to be more credible.

  • What is the Consensus Mechanism of the coin? This is how changes to the decentralized systems are decided upon.Common examples are Proof-of-Work or Proof-of-Stake. It is very good to know how the coin works

  • Is the coin centralized or decentralized? This is a basic but important to know how the network is structured. Cryptocurrencies are meant to be decentralized in nature. However, centralized coins do have their own advantages.

  • Is there a development plan?You can gauge the development team’s commitment by whether or not there is a clear timeline for the development of a coin.

  • How much money has the ICO raised and how much was spent? Any financial info on spending habits will show you a great deal about the team behind the coin.

  • How different is it from the nearest competitor?If the coins are all the same, there is little incentive to try something new.

  • How strong is the target market?Coins that appeal to small niche groups won’t be strong in the market. The group needs to be large enough to support growth but still well defined.

  • Any legal barriers? This technology is new and always changing. The legal and government bodies are still trying to catch up.So, you need to make sure there are no issues with the coins you choose.

  • Founding Team Members? The success of a coin depends largely on the core founding team.This is important regardless if you are looking at an ICO or a more established coin.

  • Are they actively communicating? The more open a team behind a coin is, the more they appear to be committed and the larger their desire to succeed appears. Do they openly talk about their development progress and stick to that timeline or is everyone pretty much in the dark?

  • How many coins will there ever be? Many coins have a finite supply, and this makes a coin have a stronger value. All coins with defined supplies have that in formation posted someplace. Usually, you can find out how big the total supply is and how much has been released so far.

  • How many of those coins have been given to the founding team? The higher the percent of coins given to the team, the worse it looks. Also, if most of the coins are owned by a few people, then this is a bad indication as well. These individuals can easily manipulate market price.

  • What is the market capitalization of the coin? This is easily found online on many exchange sites and is the measure of the coin’s value.


To learn more about every stage of ICO investing, please examine my Step-by-Step Guide to Crypto Trading.
 
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