Your Ultimate Guide to Investing in ICO Cryptocurrency
Are you planning to invest in cryptocurrencies? One of the recommended methods is investing in Initial Coin Offering (ICO) coins. These are coins released into the market through ICOs.
The ICO cryptos provide a good option for investors because they are offered at low prices to draw interest before they can start to be traded on the markets. Therefore, most of the tokens are in high demand when they hit the market and early investors can sell them at a profit.
Even as the ICOs present a golden investment opportunity, it is important to appreciate that not all of them are genuine. Joseph Lubin, Ethereum co-founder, and Brad Garlingehouse, the CEO of Ripple, lamented that most ICOs out there are scams.
This post is a comprehensive guide on investing in ICO cryptocurrency to help you know which ICO to invest in and how to optimize returns.
What Exactly are ICOs?
Initial Coin Offering (ICOs) is a method of raising funds used by projects and businesses to sell tokens in exchange for fiat currencies or digital coins. Because they are not regulated, businesses are able to raise cash fast without going through the rigorous procedures required by conventional lenders such as banks.
ICOs present investors with an opportunity to become part of major crypto projects and make some returns on investment when the value goes up. If you buy a cryptocurrency in a project that uses the proof of stake (PoS) protocol, it might be possible to get rewards for simply staking the coins.
How to Pick the Best ICO Tokens to Invest In
To invest in ICO tokens, the first step is selecting the right ICO. But this is not easy because ICOs are entering the market at a rapid rate. To pick the right ICOs to invest in, here are the steps to follow:
Evaluate the ICO Team Composition
Evaluating the ICO team can help you get important insights about the seriousness of the project. Follow the members of the team development team and advisory team to understand who they are and past success(es).
You can get the details about the members from social media such as LinkedIn or the companies they are currently working for. You could even reach out and talk to them, especially on social media.
The target is to understand the team members’ commitment, skills, and ability to help the project grow into a successful venture. If you note that the members have negative feedback arising from previous crypto and non-crypto work, it is advisable to avoid such tokens.
Evaluate the Project’s White Paper
A token is only as good as the project it is attached to. Therefore, it is advisable to only invest in an ICO token based on a high potential project. To know more about the project behind the token of interest, you should read its white paper.
The white paper is an authoritative report that informs readers about a problem and how the project under consideration plans to address it. It provides details of the project, the tokens, and their distribution. It is the talking point that the ICO creator(s) uses to demonstrate why an investor should join the project by purchasing the tokens.
If there is anything that you do not understand about the project from the white paper, make sure to seek answers from the development team. Ensure to ask even about the minor details of the ICO and the project before making an investment decision.
Find Out What Top Crypto Communities Have to Say
Crypto communities such as Reddit and Bitcointalk have become reliable sources of information for people who want to know anything about cryptos. The communities are able to look at projects from different angles and give conclusions that you can rely on when investing in cryptocurrencies. You can simply post a question about the ICO of interest and wait for replies or read past reports.
Note that even with the crypto communities, it is still possible to come across some positive threads spread through bounty programs that only target to showcase an ICO in a positive way. Therefore, you should only consider reports that are consistent with the findings from personal and professional assessments.
Check the Long-Term Use of the Funds
As an investor, you can tell the potential of a project by looking at the long-term use of the funds raised during the ICO. It is advisable to only invest in ICOs that direct funds to project development. Sustained development of a crypto project can help raise the value of the tokens and deliver a high return on investment.
How to Invest in ICO Tokens
After identifying the preferred ICO, you can go ahead and buy the tokens on sale. Here is a demonstration of how to invest in crypto tokens:
Read Through the Token Purchase Procedure
Every ICO has its own design of running the token sale process. In many cases, they provide interested parties with a landing page where they can use selected payment methods to buy tokens. However, others prefer using crypto exchanges because they already have operational frameworks to support crypto trading.
Make sure to carefully follow the prescribed crypto sale procedure for a successful purchase. For example, you should check the maximum and minimum tokens that users are allowed to purchase. The limits are used to prevent a lot of tokens going to one party.
Open a Supported Wallet
After establishing which ICO to invest in, you will be required to open a supported wallet. A crypto wallet is a digital location for storing cryptocurrencies. Note that although this is the accepted definition, the wallets do not in reality store the digital coins.
What the crypto wallets store are sets of codes that help users link with their blockchains, send their coins, receive coins, and check their trading history. The private keys is an identifying code that ensures only you have access to your coins in a blockchain. The key should always be kept private.
The other codes are the public keys that help act as the address to the wallet. Your wallet will also generate a seed phrase that is used to regenerate the private keys in case of a loss.
Make sure that the wallet you select supports the ICO token under consideration. Some great examples of crypto wallets out there include Ledger Nano S and MyEtherWallet. Remember that you should never share your private keys and/or the seed phrase of the wallet.
Join the Exchange Being Used to Sell the Tokens
If the exchange running the ICO only allows users to purchase the new tokens with other coins such as Bitcoin, you need to convert your cash to the supported token using a platform such as Kraken or Localbitcoins.com. Then, move the coins to the exchange running the targeted ICO.
To make a purchase, navigate to the trading platform on the exchange and select the new ICO token. Then, pair it with the coins in your exchange account and click purchase. The new ICO tokens will be credited to your exchange account.
Move the Tokens to Your Wallet
Most cryptocurrency exchanges are considered insecure because they are centralized and an easy target for hackers. If you follow the history of cryptocurrencies, every major loss is likely to have happened in the exchanges. Some of the attacks on exchanges include the hack of Mt. Gox in 2011 that resulted to loss of over 600,000 BTC and the recent Youbit attack that forced the exchange to file for bankruptcy.
To keep ICO tokens safe, it is advisable to move them to your wallet immediately after the purchase. This is considered a safer place because only you have the private keys. The tokens will be safer if you can store them in a cold wallet such as a hardware wallet or paper wallet.
How to Profit From an ICO
Once you have identified a good ICO, there are several ways to benefit from it. Note that the selected strategy will depend on personal targets to either sell the coins immediately or hold them for a longer period.
Sell the Tokens When the Price Goes Up
The simplest strategy is buying the tokens on offer during the ICO and selling when the price goes up. Because only a limited supply of tokens is released into the market during the ICO, few people are able to get the opportunity.
When the tokens are released into the market, the demand from those who did not get the opportunity pushes the price up. This is a great opportunity to sell and make some returns on your investment.
Trade the Tokens in the Markets
Instead of making money from an ICO by selling the tokens immediately when they hit the market, you could consider trading them on the markets. Crypto trading involves taking short or long-term positions based on market trends.
It is important to appreciate that the crypto market can be highly volatile. Therefore, traders should take time learning how to interpret the market trends and use important features such as a stop loss to keep associated risks low.
The Final Take
If you have been considering investing in ICO cryptocurrency, it is a great method of joining the crypto niche and enjoying the associated high returns. ICOs present investors with an opportunity to buy digital coins when prices are low and selling later when the price moves up or vice versa.
However, it is important to appreciate that investing in ICOs requires taking some risks. At this point you might be asking, “Should I invest in cryptocurrency?” While the answer to the question is “yes”, it is important to take caution by following these best practices of crypto investing:
- Only invest what you can afford to lose.
- Make sure to spread your investment in a number of assets.
- Do not borrow money to invest in ICO tokens.
Note that no matter the risks involved, cryptocurrencies are ideas whose time has come. Therefore, do not be left behind as others march ahead. Use the above guide to identify good ICO tokens and set aside some funds to buy them.