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How to invest in an ICO and not lose money.

Investing in ICOs can be a profitable venture, but it is important to be cautious in order to avoid losing money. This article provides tips on how to evaluate ICOs to ensure a wise investment. Enumerated among these tips are researching the project's goals and team, paying attention to the ICO terms and conditions, observing market trends, and investing in projects that offer repeat business potential. Armed with these guidelines, one can make informed choices and invest wisely in digital assets.

An investor who wants to make money on an ICO faces two big problems, tells usย Andrey Mikhaylishin, CEO Joys digital.

1. Investing in an ICO is a high risk of running into scammers. Mainly due to past events, when projects โ€“ scam โ€“ raised money and disappeared. But now the scam has become less: the bills on ICO adopted in many countries (up to the ban on holding) influenced the situation โ€“ and this ultimately gave rise to requirements for projects, and, accordingly, their quality.

2. The desire to immediately enrich due to the growth of the course, to get โ€œXโ€. This perception model moved from last year, when projects that successfully entered the ICO brought investors very quick returns. However, a novice investor should consider that the implementation of even a successful project today takes 2-3 years, and sometimes more. Largely because the trend for โ€œcryptocoticsโ€ is a thing of the past, and now larger-scale projects are rising into the ICO arena.

An investor cannot be fully insured against scam. But there are several rules, compliance with which increases the investorโ€™s chances to invest in a worthwhile project:

Follow the 4T Model

how to invest in ico

4T (4K in the Russian interpretation) is Team (Team), Tech (technology or Code), Theme (Concept), Token (token or Coin). It helps the investor to make sure that the project is carried out by real people who want to realize it:

Team

โ€ข Study the activity of team members on social networks: when profiles are registered, how often publications appear there and on what topic, whether they have friends, etc..

โ€ข Analyze team competencies. See who did what before. If you have any questions, ask them. Fraudsters will either not answer, or they will answer evasively.

โ€ข Contact the project consultants, ask them. Consultants value their reputation, so they will honestly tell you about the project. Also, if the project has partners, or it works with some funds or associations, you can contact them.

โ€ข Check where the company is registered, its address, information on the official websites of registrars, when and by whom the domain is registered.

Tech (technology or code)

If you are not a programmer, ask a general question about technology to someone from the team, or ask for the source code. Fraudsters will either evade the answer, or give you someone elseโ€™s code: check the name of the project or the account, who posted it. If you have familiar developers, ask them to help..

Theme (Concept)

It is important to evaluate the commercial prospects of the project:

โ€ข Market
โ€ข Ability to scale the project
โ€ข Financial model
โ€ข Economic usefulness and demand
โ€ข Differences from competitors

Read White Paper carefully. Concepts of scam projects are usually very confused, it is difficult to understand them. Do not be too gullible: if the team gives too optimistic forecasts for the development of the project โ€“ most likely, these are empty promises.

See why and how the project uses the blockchain: if the task that the project took on can be solved without this technology, itโ€™s worth considering.

Pay attention to the Road Map: do the deadlines for the implementation of tasks converge with what is written there.

Token (Token or Coin)

Determine whether the token is utilitarian or dividend โ€“ giving the right to participate in the companyโ€™s future profit. It is better if it is utilitarian: such tokens can be exchanged for services or company products. See if the token passed the Howey test. Understand how the owner of the token can use it inside the system: the token can be a speculative financial instrument, to which financial regulators are ill.

Learn how many tokens a project has, how much they cost and at what price you can buy them in the early stages of an ICO. What percentage of tokens is left to the team (usually around 10-20%); how much goes to the bounty (not more than a few percent).

See if the team is ready to return the funds if it fails to collect the required amount, or transfer it to a third authoritative party acting as a guarantor of fulfillment of obligations (escrow).

These are one of the main points on how to invest in an ICO and not say goodbye to your money..

Product availability

how to invest in ico

If earlier it was not a shame to go to the ICO with one concept only, now the situation has changed:

You risk a lot if there is no product at all. The project has only White Paper with a description of the idea, some technical documentation or part of the finished code.

You minimize risks a bit if you have a minimum working model (MVP). This is a prototype of a product with minimal functionality that you can โ€œtouchโ€, test โ€“ so you better understand what you are investing in.

Low risk โ€“ product availability. The product is ready, it even has users, and the funds are required for the development of functionality, scaling, marketing, etc. tasks. Here the risk of โ€œscamโ€ is practically eliminated, and the risks of failure of the project are minimal.

See expert rating

how to invest in ico

If you want to invest in ICOs, you can rely on the opinions of experts in the field of blockchain projects and ICOs. For example, examine the ratings of projects: bitexpert.io, icorating.com, tokenlab.info.

You can not rush: wait for the start of the ICO and see how much the project will raise funds. Typically, investment funds and large private investors enter the project in the first minutes of the official launch of an ICO or PreICO. But itโ€™s worth checking to see if the counters on the site are not wound, showing the amount of investment received. To do this, you need to find out the number of the investment wallet for which the project raises funds, and check in the blockchain that there really were transactions on this wallet. For the Ethereum network, this can be done here. etherscan.io, for Bitcoin โ€“ here blockchain.info

Remember, following simple safety rules will help you understand how to invest in an ICO, do it better and with minimal risk..

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Comments: 1
  1. Wyatt Davis

    What are some effective strategies or tips to ensure a successful investment in ICOs without encountering major losses?

    Reply
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