Basics You Need to Know Before Investing in ICOs

23 July 2018

This article was written by Josh from Would you like to share your ideas? Submit your cryptocurrency guest post here.

Investing in ICOs (initial coin offerings) can be an artform itself. Different investors follow different methodologies and rules, but before any real investing can take place, you need to know the basics.

Like what is an ICO really? In its most basic form, it’s a new way of funding a business that runs on some kind of blockchain technology through the issuance of digital tokens. These tokens normally serve a purpose in the ecosystem of the project and are assigned a value to.

In this post, we’ll take a closer look at some of the essentials you need to know before investing in initial coin offerings and answer some nagging questions.

Are There Risks Involved: Should You Invest?

If you’re asking this question I’d like to counter by asking how you became interested in investing in ICOs in the first place? Chances are you read an article online or heard from a friend about some kind of crazy returns they achieved on their investment, and probably in a record time.

It’s easy to look at charts from Coin Market Cap and see 5x, 10x, 20x or oven more returns on investments just over the past year – obviously depending when you entered the market and closed your position.

That being said, this can not be possible without any risk. Crypto is highly volatile. There are very little guarantees when is comes to investing in ICOs, if any.

It comes down to the level of risk that is acceptable to you. It’s easy to invest in an already established blockchain project that has a track record compared to a new project that is about to launch, is not yet listed on an exchange and possibly has no working prototype.

You need to manage your risk level. Splitting your portfolio into specific portions percentage wise dedicated to ICO investing, small market caps and medium-large caps could be one way of doing so. Be sure to learn more about the cryptocurrency investment strategy for long-term successs.

Not financial advice, but you get the point. I don’t want to dive to deep into this right now as this article aims to cover the basics.

How Does the Actual Process of Investing in an ICO Work?

Crypto can often be like the wild wild west, almost anything goes. What I’m trying to say with regards to this, is that not ICOs will follow the same process.

One ICO might choose to only accept Bitcoin in exchange for tokens while another accepts Bitcoin, Ethereum and USD through Master Card.

However, the basic concept remains the same across the board. A blockchain project will issue a set amount of tokens and with that, a value towards each token. Next, they will set benchmarks for the token sale to reach in the form of a soft and hard cap.

The soft cap is often the minimum amount of tokens the company will need to launch the project and the hard cap the maximum. Crypto market cap explained here.

The company can even decide to sell tokens at different price levels during pre-sale and main/public token sale stages. Often times, presale token price which are cheaper than public sale prices, get marketed to investors with deep pockets that buy in huge quantities.

So, after you’ve done your research and chosen an initial coin offering to invest in, chances are (remember the exact process might differ) you’ll probably need to register an account and send the minimum token/fiat amount to the address required in order to purchase your ICO tokens.

It’s best to thoroughly research a project before investing, not just the essentials, but also things like token economics, how to receive your tokens and when you’ll receive them. Don’t just invest blindly and accept everything as standard – make informed decisions.

Often tokens only get delivered to your wallet after the token sale period has ended – that’s definitely something to take note of as well.

Where Can You Discover and Learn About Different ICOs Hitting the Marketing?

This part can be a bit tricky and possibly overwhelming depending on how you approach it. There are tons of YouTubers, ICO review websites and newsletter/report publications that provide valuable insights into new ICOs hitting the market.

Spend some time doing your own research in identifying individuals, groups or websites that talk sense and don’t just summarize what’s mentioned in a white paper.

If you’d just like to find out about the latest ICOs hitting the market and upcoming blockchain projects, the following sites will help:

Should You Invest in the ICO or Wait Until the Project Is Listed on Exchanges?

Keep in mind that if you missed the token sale of an ICO you wanted to invest in, it’s not the end of the world. You can catch it as soon as it hits the exchanges.

Just remember that often, especially with tokens getting listed on exchanges like Binance, there is a huge pump in price. Be ready to act quick or wait till their is a sell off to enter into the market and solidify your position.

However, when a project is legit and there is enough hype around it, you’d want to get in at the lowest prices possible for maximum returns.

In Closing

As you can see, the basics of investing in ICOs are just that – basic. You should now have a better understand of the initial coin offering process. Now it’s time to get to work, identify a few ICOs you’re interested in, dive head first into researching them and leave no stone unturned.

Always remain open minded, ready to learn and educate yourself!

If you’re doing an ICO and would like to promote it then be sure to check out our ICO press release service.