Research an ICO (Initial Coin Offering) Like a Pro – Insider Information

I usually write about Altcoins investing and trading. Right now I wanted to spill the beans on how I research an ICO. If you are not familiar with an ICO, it is a coin offering an altcoin does to raise funds to build the product or to expand their company/reach.

Instead of doing an IPO as most traditional companies do, a lot of companies are now going ICOs. Why? Many reasons but I would say the top 2 are the fact that millions of dollars are being raised in a short amount of time as investors are trying to be a part of the new altcoin launches in order get in on the ground floor. The second reason is that investors that take part in an ICO do not own actual equity in a company, they are essentially just giving the company money in order to launch their product. In traditional IPOs, investors would actually own a small or large percentage of a company when they invest possibly giving them voting rights as well as actual company ownership.

Now I want to jump right into how I analyze and research an ICO. While some people start with the technology or the idea itself, I have to admit that I start with the ICO token metrics. First, calculate market cap to make sure they are not overvaluing themselves compared to other ICOs or existing altcoins.

Determine the Market Cap of the ICO:

  • Calculate the token price with this formula ETH Current Price/Num Tokens per ETH
  • Now multiply Token Price * Number of Tokens in Circulation (tokens sold in crowdsale + presale)

This is the company market cap roughly if the ICO sells all available tokens during the crowdsale. Take this market cap and compare it to the top 100 altcoins to see how the coin compares. If the market cap equals $30,000,000 then they would need to grow to $90,000,000 in order for you to make 3x your investment. Now go to Coinmarketcap.com and see what companies have the same market cap as this ICO. Ask yourself: Is this ICO as good as the existing altcoin and is it or should it be worth the market cap they are trying to achieve with the ICO launch.

Now that you have determined that the market cap is good and that the altcoin has the potential to make you 3x – 5x your initial investment it is time to move on.

Read the Whitepaper:

Ask yourself these questions: Is the technology unique? Can this company survive/thrive without doing an ICO? What is the purpose of the token in the company ecosystem? Are they just creating a coin to profit in this ICO craze or does the coin serve an important purpose? How will the coin increase in value, is it based only on hype on exchanges or is it from it being used as a utility in the company? Does this company have competitors that may make this one irrelevant?

Research the Team:

First off, is the legitimate? Do they really exist on Linkedin, etc. You would be surprised how often the team members can be faked. Read the linkedin description to see if the team member is full-time with the ICO and if the ICO is even mentioned at all.

Research the ICO Advisers:

Are the advisers relevant to the ICO or are they just a shiny attention grabber? If you see the same adviser on multiple ICOs then their credibility/value to the ICO diminishes greatly.

Determine Level of Hype:

Don’t underestimate this step. An easy way to get a feel for hype and popularity is to google the name of the ICO. See how many mentions are in the google search results. Make sure you use exact matches such as quotes in the google search so that you don’t get results for the word ‘the’ or something generic. How many times are they mentioned on social media? The best way to do this is to go to buzzsumo.com and type in the name of the ICO. This will give you a results list showing content and mentions on Facebook, Linkedin, Twitter, Pinterest and how many times the content pieces were shared. Go to the ICO website and search for the websites, social media and chat programs where they interact. Some of the most popular are Slack Channel, Telegram Chat, Twitter, Bitcointalk.org, Reddit.com.

Check out their existing product and code:

For this step you don’t have to know programming or anything like that. You will just want to go to their Github.com account as this is where they will store the code for their project. You can see 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.

Research similar altcoins:

Go to Coinmarketcap.com and CryptoCompare.com and study similar coin charts. Of course, every company is different but you just want to get a general feel for the potential. Right now ICO investors are leaning towards investing in Protocols and Platforms such as 0x, Kyber and Raiden. Ideas that are needed to propel blockchain and cryptocurrency forward.

Good luck researching ICOs and may you see 3x – 100x returns. CryptoDayTrader, over and out…

Featured image courtesy of Shutterstock. 

Author:
Kent - Co-Founder of CryptoMarketBeat.com, where we are building Pro Crypto Analysis Tools and share crypto related investment info.