For beginners, an ICO or an initial coin offering is basically a fundraising method that aims to trade crypto coins about to be launched with other cryptocurrencies that have a transactional value. An ICO gives both small and big investors a chance to invest in a cryptocurrency right at the start of their journey. During last year we had numerous stories of successful ICOs.
Although, we have seen various success stories, it is pertinent to raise the issue of fraud through ICOs in front of all investors. Mycelium ICO is one team that just vanished after they generated the funds. Research from later on suggested that the funds were used to finance their own vacation. Lack of regulations is a very important reason why frauds happen and continue to happen with ICOs.
With this recent wave of unethical ICOs becoming widespread, investors need to take care of many things before they go on to invest in any ICO. Here we mention a few things that should be taken care of before you enter the market for investing in an ICO.
The first step in studying an ICO is to find out literally everything you can about the team behind it. Leave no details unattended, especially details regarding the advisory board and the development team. Have a look at their LinkedIn profiles and look up for them on Google. See if the company has any famous people in the advisory board, so that you can find out their crypto experience. Also see if they have been part of any ICOs before.
Another thing to do is to see what the other investors have to say about the launch. A good resource in this regard is Bitcointalk.org that is the biggest forum for all issues related to bitcoins and other cryptocurrencies. Investor concerns are always answered on this thread, by developers who are concerned. Find out what the experienced members say and what you can do about it.
Do some research on your part and evaluate the stage the project is on. Does the project only have a white paper, or does it also have a beta version? Projects with working codes are preferred by investors; however, there have been many occurrences where ICOs without any written codes have become successful.
Venture Capitalists support new ICOs even before their launch. Look for any VC that is backing up the launch and see whether they are well known or not.
Evaluate Their Whitepaper
If all other methods lead to a dead end, you should try to go through the white paper that has been published by the developers. Most investors typically shy away from reading the Whitepaper. You should not hesitate from doing so. If you do plan to invest in the ICO, you would learn about what you’re investing in and the difference it could bring to your world.
The bottom line is that you have to be careful before investing in an ICO.