Investing in crypto currencies: The ICO Strategy

An ICO is in parts comparable to an initial issue of securities on a stock exchange. The word ICO stands for Initial Coin Offering. An ICO is an opportunity to acquire money for projects in the Blockchain ecosystem via crowdfunding. Those who invest money in this project receive tokens of the planned crypto currency in exchange – which, as soon as the supported project has established itself, can certainly pay off – at least that’s hope.

What is an Bitcoin loophole?

This means that money that comes from an ICO usually goes to the Bitcoin loophole developers. In the best case scenario, it should be used to further develop the crypto currency or to make it ready for the market in the first place. This makes the Bitcoin loophole as attractive as it is dangerous.

Risk analysis: ICO in the time horizon
Let’s look at the ICO from an investment perspective. Of course, there are other reasons to invest in a new crypto currency, but here we only consider the investment case.

First of all, it should be noted that you usually acquire the right to something from the ICO that does not really exist yet. You buy a token, which is usually distributed after the end of the ICO, for example via a protocol like Ethereum. When the ICO is finished, the developer can inform his supporters that the tokens will be transferred soon. So everyone creates an Ethereum Wallet and receives a credit for the purchased coins.

Even if you get the coins well written, you should be aware that it is still only a “number”. A real equivalent does not exist at this time yet. And the coins can rarely be used in the early phase.

Conclusion: First of all, we only receive a few coins that no one may know, that have no equivalent value and that are not even ready for use.

Those who invest in the news spy should therefore have two qualities

1. frustration tolerance like seen here:
Many investments promise the new disruptive revolution in various areas, but not all of them will survive. Often enough, the current hype is compared with that of the news spy Internet at the end of the 90s. Because even then the enthusiasm was huge, the innovativeness high and everyone sensed the imminent wealth. Enthusiasm quickly came to an end when many of the once hyped companies went bankrupt. This can also happen with blockchain start-ups. Remember: You are investing in something unreal, new, unknown. Assume that in the worst case you will suffer a total loss. Calculate your willingness to pay accordingly.

2. patience
As already mentioned, you are investing in something that you cannot use today, tomorrow and possibly this year. Especially because you are an investor in the early phase of a crypto currency, you usually have higher return potential than with established currencies, but the loss potential is also much greater. And the road to wealth can become a dry spell. Invest only the money that you can easily do without. Because you won’t see it again so quickly. The money that flows to the developers is intended for the development of the product. And that can take a long time, so be aware that ICO’s is a long-term strategy and not a quick profit.

But how do you find the right ICO?
This is not easy, because ICO’s are one of the least structured investment vehicles for crypto currencies. You can’t just open a stock exchange on your smartphone that allows you to swap currency pairs back and forth. Instead, you have to find your way around a publisher’s individual website and transfer BTC or often ETH to a foreign company.

Each ICO is a new task and should be thoroughly analyzed. A critical point of view will pay off in the long run: Is the publisher only interested in transferring an existing model to a blockchain technology or does the project offer real added value that can achieve measurable results?

Since it has to be estimated how the project will develop in the future, the team is also decisive: the developers should feel the fire to drive the project forward.

The task is to condense a huge amount of information about the project into a few facts that are relevant for decision-making. This costs a lot of time, but reduces the risk of blindly investing in new projects and running into the knife of the black sheep – who, unfortunately, are increasingly taking the floor.