ICOs have closely followed the emergence of cryptocurrencies as a way for blockchain-focused companies to raise money. They allow regular people to get into the company as early-stage investors by purchasing tokens or coins offered by the company.
ICOs are an opportunity for companies to crowdfund their financing and for people to invest and get a hold of potentially valuable cryptocurrencies. They are typically accessible from platforms like the Bitcoin Pro App.
However, the emergence of scam ICOs has put people on guard about investing. In this article, we’ll be looking at the three easy-to-spot red flags you should avoid when looking for ICOs to invest in.
1.Anonymous team or team with poor credentials
Every bonafide investor knows that the essential component of any business is the team that runs it. Looking at the previous work history of the team behind an ICO can tell you a lot about how it’s going to turn out. While it might seem a bit like gatekeeping, you can’t go investing your money in everybody with a good story to tell.
You can use LinkedIn and Twitter as resources for investigating the credentials of the organization’s top guns. Research things like the school they attended, their previous work experience, and colleagues.
In a case where you find the crypto ICO’s offering compelling, but the team’s credentials are still lacking, you should look for signs that they are capable of delivering, e.g., the repositories of their projects should show that they understand how the technology should work.
2.Unconvincing website/whitepaper
A good rule of thumb to work with is that if a company has the resources to build tokens for an ICO, they should be able to design a befitting website. Although there might be legitimate reasons for the lack of a well-designed website, it’s best to err on the side of caution.
On the other hand, a whitepaper is the single most important document a blockchain company has to offer to the general public. It outlines the details of the project, the vision for the project, the technical details, and more. It’s basically a tell-all that tries to convince investors that the company is worth investing in.
Even if you can’t completely understand the details of the whitepaper, a lack of a comprehensive one should always be a turnoff.
3.Unclear roadmap for the project
Even on the whitepaper, ICOs tend to share the roadmap for the project from fundraising to development. The idea behind it is to show that the project is a long-term one, and the team is committed to seeing it through.
The lack of a clear roadmap could be indicative of a team that hasn’t quite figured out how they intend on running their business. It may also be indicative of a team that plans on bailing as soon as they receive funding.
ICOs typically have dedicated Slack channels that everyone can join to check for updates on the progress of the project.
Conclusion
Like any other kind of investing, you need a lot of research to become successful at it. Although they are helpful, the tips in this article may not be enough to guide you during an investment. It’s crucial to look into all the information you can before staking your money on the future of a company.
Table of Contents
