What is an ICO?
An ICO is comparable in parts to an initial issue of securities on a stock exchange. The word ICO stands for Initial Coin Offering. An ICO is a way to earn money for projects in the blockchain ecosystem via crowdfunding. Those who put money into this project will get into the exchange of tokens of the planned cryptowogy - which can be worthwhile, as soon as the supported project has established itself - so at least the hope.
This means that money that comes through an ICO usually flows to the developers. In the best case, it should be used to further develop the crypt diet or to make it market-ready at all. This makes them as attractive as they are dangerous.
Risk analysis: ICO in the time horizon
Consider the ICO from the investment perspective. Of course, there are other reasons to invest in a new crypt diet, but we are looking at the investment case.
First of all, it should be noted that the ICO generally acquires the right to something that does not really exist yet. You buy a token that is usually distributed after the end of the ICO, for example via a protocol like Ethereum. When the ICO is finished, the developer can tell his supporters that the tokens will be transmitted soon. Everyone creates an Ethereum wallet and receives a credit for the coins purchased.
Even if you get the coins well-written, you should be aware that it is still only a "number". There is no real value at this time. And can be used the coins in the early phase in the rarest cases.
Conclusion : First of all, we get only a few coins that may not know anyone who does not have an equivalent value and which are not even ready for use.
Therefore, if you invest in ICO's, you should have two features:
1. Frustration tolerance Many investments promise the new disruptive revolution in various areas, but not all of them will survive. Often enough, the current hype is compared with the Internet at the end of the nineties. Even then the enthusiasm was huge, the enthusiasm for innovation was high, and everyone was aware of the imminent wealth. Enthusiasm was quickly put to an end when many of the once-bombed companies went bankrupt. This can also happen with blockchain startups. Remember, you are investing in something unreal, new, unknown.Assume that in the worst case you will suffer a total loss. Calculate your payment appropriately.
second Patience As mentioned above, you are investing in something you can not use today, not tomorrow, and maybe not this year. Just because you are an investor in the early phase of cryptography as a rule, you usually have higher yield potentials than with established currencies, but the loss potential is also significantly greater. And the path to wealth can become a thirst. Just put the money you can easily do without. Because you will not see it so quickly. The money that flows into the developers is designed to develop the product. And that can take a long time, so be aware that ICO's are a long-term strategy rather than quick profits.
How do you find the right ICO?
This is not easy, because ICO's are, as a matter of experience, one of the least structured investment vehicles for cryptic investigations. You can not just open a wallet on your smartphone that allows you to swap currency pairs. Instead, you have to deal with an individual website of the publisher and transfer BTC or often ETH to a foreign company.
Each ICO is a new task and should be thoroughly analyzed. A critical standpoint will be profitable in the long term: Is the publisher only concerned with transferring an existing model to a blockchain technology or does the project offer real added value that can produce measurable results?
As the project needs to be evaluated in the future, the team is also crucial: the developers should feel the fire to drive the project forward.
A huge amount of information about the project has to be concentrated in a few, decisive facts. This costs a lot of time, but lowers the risk of investing blindly in new projects and running into the knife of the black sheep - which unfortunately unfortunately more frequently to speak.
To invest professionally in ICO's, you should also take a look at our stock exchange bulletin. There, we analyze each month the ICO of the month selected by us - with a focus on the most important data necessary for the investment decision.
Make sure, now, the first free edition of the cryptocompass 07/2017:
The next part continues with taxes and legal aspects of crypto-investments.