Crypto Frontline

Analyze an ICO Potential in 5 Steps

The ICO market had been booming in the last two years. As we have discussed recently in an article related to ICO statistics, the blockchain-based startups managed to raise more than $6 billion in 2017. What is also important to remember is that those people (no matter if we talk about institutional investors or any other person like ourselves) have invested in this kind of project for one main reason – profit.

Their goal is to generate returns over time, but if we analyze all ICOs, we will find out that not all of them managed to accomplish every objective they set during the fundraising campaign. Because of that, profits had also missed expectations. Not only profits but tokens that were sold during the ICO are below their initial value, which is frustrating considering that the prices had a discount during the ICO.

That is why we want to discuss the 5 most basic steps that you need to follow in order to find out if an ICO has a great potential or not.

Step 1 – In-depth study of the White Paper

It has to start with this. Although it may sound too obvious, most of the people that want to invest in an ICO do not pay attention to this issue. They are blinded by a marketing campaign who promises huge returns and forget that they need to understand the business behind the ICO before deciding to invest in it. You must understand how the business will operate in greater detail and that is why it is crucial to begin by studying the white paper.

Step 2 – Understanding the domain of the ICO

The blockchain technology can be applied to a wide variety of domains. Because of that, before you decide to invest in the ICO, you must first understand the domain it is addressing. This step is also focused on education and it should help you achieve information about the environment in which the ICO will operate. Also, you must find if the ICO manages to solve some current problems in that particular field. If it does, it is definitely a huge advantage as the potential is higher for this type of companies.

Step 3 – Analyze the team behind the ICO

In this phase, you must search for information about the team that works for the ICO. See what kind of people are working there, what is their background, see if they had any previous successful ICOs, or if they had worked for a company that had success in the business. Experience will definitely play a major key in solving the problems that the company will encounter after the ICO. Also, a good team can constantly develop and improve the business, which can benefit all the people that have invested.

Step 4 – Get feedback from online communities

Before the ICO, a lot of advertisement is being done and talks on forums and other websites are initiated. By engaging in those conversations you can get feedback from people that had joined other projects in the past. It is important to know how to filter information and choose to listen only to those people who know how to formulate an objective critical opinion which will put in balance all the positive and negative aspects of the projects involved in the discussion. If the ICO you are thinking to invest in gets positive feedback online, then it is possible most of the people are seeing it as a project with high potential.

Step 5 – Spot disruptive projects

An investing methodology adopted by investors willing to accept risks – is to find companies and technologies that disturb the actual natural order of things. The blockchain technology itself is disruptive and applied in an intelligent way it can develop new industries and business models. This step is the fifth and probably the hardest of all. If you will be able to spot companies that manage to drive innovation at an upper level, the chances of success are exponentially higher.

To summarize, these are the five most important steps you will need to take into account in order to be able to spot ICOs with high potential. Practice is required to master them all, so expect both winners and losers until you develop your own methodology and learn how to spot those precious companies.