Investing in ICO projects constitutes one of the highest investment risks. This is because investors are often investing in a new technology or idea without a Minimum Viable Product (MVP). Moreover, fundraising via ICO is not currently regulated by law and policies, which means that ICO projects are not legally held responsible for any issues that arise from your investments. As a result, it is oftentimes challenging to discern the good projects from the bad, but here are some considerations to keep in mind when looking at ICOs.
1. What do project owners plan to do with the funds raised?
It is important to ascertain if the proposed fundraising amount is feasible, and the potential of the project to be able to generate income and profits. Some projects that do not even have a proper company and business license established are considered unreliable. If projects try to raise what seems to be an unfeasible target amount, this should also raise red flags for you. Thus, when faced with these conditions, investors need to approach such projects with caution.
2. What are the deliverables to token holders who invest in ICOs?
Aside from the possible capital gains once the token is listed on an exchange and subject to market forces, in the initial stage, investors should pay greater attention to the utility and possible use cases of the token.
3. How strong is the team behind the ICO project?
If the ICO issuers or project owners have experience in the blockchain and crypto industry or have a proven track record with successful ICO projects, the greater the chances for success. Investors can also look at the advisory team for the project, as advisors with experience in crypto projects can lend confidence to those interested in investing.
4. What are the ICO project’s plans for exchange listings?
Token holders are able to earn profits from the ICO once the coin is listed on an exchange. However, there are also other factors to consider. For example, it is necessary for there to be a high level of liquidity or number of traders on the exchange chosen by the project owners for their coin to be listed on. If trading liquidity is low, it will be quite challenging for the price of the coin to move upwards.