If you haven’t heard of an ICO, it is officially known as an Initial Coin Offering. This is what altcoins do to raise money to build their product or service.
Instead of doing an IPO like traditional companies typically do, a lot of early-stage companies are now launching ICOs instead.
Why Launch an ICO?
There are numerous reasons to launch an ICO. The top two reasons are:
1.) It’s a hot time to join the ICO train-millions of dollars are successfully raised in a quick amount of time. They can do this because a lot of investors want to be on the ground floor of new altcoin launches.
2.) Investors that participate in an ICO do not own equity in the company; they are essentially giving the company money to launch their product. With traditional IPOs, investors own a small or large percentage of the company when they invest in it. This ownership stake can give the investors voting rights on major company decisions.
Now that we understand why companies are launching ICOs let’s start with the six parts to successfully research an ICO.
Some people have a preference to look at the underlying technology first, but it’s usually best to start with calculating the ICO token metrics.
1.) Determine the Market Cap of the ICO:
It’s important to calculate the market cap to ensure that they are not overvaluing themselves compared to other ICOs or existing altcoins.
- Calculate the token price with the following formula: (BTC is used in place of the ICO name)
- BTC Current Price/Num Tokens per BTC
- Token Price * Number of Tokens in Circulation (crowdsale + presale total sold tokens)
This approximately equals the company market cap, only if the ICO sells all available tokens during the token sale.
Compare this market cap to the top 100 altcoins market caps compares to the ICO market cap.
If the market cap equals $10,000,000 then they would need to grow to $50,000,000 for you to make 5x your investment.
Visit Coinmarketcap.com and see how many companies have the same market cap as this ICO.
- Is this ICO on par with the existing altcoin(s)?
- Is it worth the market cap they are trying to achieve with the ICO launch?
Now if you have decided the market cap is sound it is time to move on.
2.) Read the Whitepaper:
Ask yourself these questions:
- Is the technology special?
- Can this company survive without launching an ICO?
- What’s the token’s purpose in the company ecosystem?
- Is this solely a coin to profit in the ICO fad or does it have a critical purpose?
- Will the coin increase in value based on hype on exchanges? Or will its rise be from it being used as a utility in the company?
- Does this company have competitors that may make this one irrelevant?
3.) Lookup the Team:
- Is the legitimate?
- Do they exist on Linkedin? Read the LinkedIn descriptions to see if each team member is with the ICO.
4.) Who are the ICO Advisers?
Are the advisers relevant to the ICO? Or are they only fluff?
5.) What’s the Level of Hype?
A quick way to measure the hype is to google the ICO.
Track how many mentions are in the google search results.
Go to the ICO website and search for the sites, social media and chat programs where they interact.
6.) What is the Existing Product and Code?
For this step, you don’t have to understand computer programming.
You only need to go to their Github.com account. This website is where they will store the code for their ICO
You can evaluate how often they update their code and how active they are developing.
Also, do some research on their past products if they are an existing business that is just expanding by offering an ICO.
Good luck researching ICOs and remember, never invest more than you can afford to lose.
If you enjoyed learning about ICOs and would like to learn more about them please check our blog as we launch https://hybridblock.io/ the worlds most robust cryptocurrency ecosystem.