An Initial Coin Offer (ICO) can be a fantastic investment opportunity for those who are savvier with their finances, and have a little extra knowledge of the tech/crypto world as well. However, the surge in the popularity of cryptocurrencies has drawn some less savory characters to the market as well, and right now it can be quite dangerous to blindly invest in an ICO without knowing what you’re doing. On the other hand, knowing the positive signs of a good ICO can help you quickly point your search in the appropriate direction.
- Interesting new technological concept
Simply copying what Bitcoin did hardly cuts it anymore – not even close. People want to see an interesting idea that explores the possibilities of cryptocurrencies in more creative ways, putting their computing power to something more useful than simply verifying blockchain transactions.
Golem made a big splash with its arrival due to being based on a concept like that, and if you’re looking for a currency that has a stronger long-term potential, look for an ICO that revolves around something like that.
- Reliable leadership
It’s also very important to verify who’s running the project. The cryptocurrency market has attracted some people who’re completely uninterested in helping the community or developing its values further, rather they’re only in it for the quick opportunity to make some cash from naive investors.
Always make sure that the people behind the ICO have a public profile, and better yet, make sure that they actually have some history in the industry and previous experience. It’s not rare nowadays to see an ICO driven by people with many years of experience in the tech industry or other fields, and that’s pretty much how it should be at the moment.
That’s not to say that a new arriver to the market should automatically be ignored, but you should also take more time researching their past and learning about their abilities and ideals before deciding to invest anything in the project.
- Prominent partnerships
Another good sign is if the ICO is backed by a prominent entity on the market. It could be a partnership with a major corporation that’s planning to use the new cryptocurrency in their own services, or it could be the fact that the ICO is getting promoted by trustworthy companies.
The general point is, if major players on the market trust them, then they’ve obviously done their fair amount of research and know exactly what they’re getting into. You can piggyback on that and trust the ICO by extension, though of course you should still do your part and look up everything you can about the company before putting any significant amount of money into the project.
- Active community participation
In this day and age, engaging your community when you’re running a project involving technology and the Internet is pretty much expected. It should raise a few eyebrows when you see the project runners avoiding any contact with their online communities, not posting regularly on social media and forums, and generally running the show from the shadows.
Now, it’s a fair point that some entrepreneurs are a bit “old school” and simply aren’t that familiar with online community interaction and engagement, and in these cases their silence can probably be interpreted as caution, as they don’t want to say anything that can be taken out of context later on.
But even then, when you’re investing significant amounts of money in a project like that, the logical alternative is to hire a community manager to handle these things for you. If the organization doesn’t even want to do that, then there is definitely something odd behind the scenes.
- Good long-term prospects
Do you expect the ICO to be around one year from now? Five? If the technology behind it, and the overall platform, are showing good prospects for long-term sustainability, this is definitely a good sign. This overlaps a bit with the advice about investing in an ICO based on solid technology, but it’s not the same point.
A new cryptocurrency can have a strong long-term potential without being tied to an innovative new technology. For example, if a major gaming company announces that they are going to use their own new cryptocurrency as an alternative form of in-game currency for microtransactions, you can expect this to stick around for quite a while. In fact, these kinds of projects have the best potential for growth, as the company behind it will likely make a very strong push to popularize it and integrate it more tightly with their own ecosystem.
- Responsive to criticism
Last but definitely not least, it’s important to look at how the company behind the project deals with criticism. Nobody is perfect, and the tech market in particular is full of ideas that have a good potential but lack this or that. When people find the project interesting and they see some flaws in it, they will start providing constructive criticism about how it can be improved.
If the company takes these opinions and acts on them, this is a great sign for their intentions. Someone running a scam show will not care at all about what people think of their project, and any potential flaws in its implementation. On the other hand, someone who responds actively to these criticisms is probably worth following.
Note that “action” has a pretty flexible definition here. Not all criticism is good, and sometimes the organization will have a valid reason to do things in a certain way that people don’t agree with. The important thing is to see how they respond – even if they don’t change their actions, they should still provide a well-written justification for that. Also take note that they may have already responded to a certain piece of criticism before, in which case they might not say anything when the same argument is brought up later on. Just make sure to do enough research on the topic before jumping to any conclusions.