There is a new gold rush and this one’s happening in the virtual world. ICO’s have made millionaires out of people in just a few years. But, interestingly enough, there are not many people who are familiar with the concept. Let’s change that today. Here is everything you need to know about ICO’s and how can you make money from them.
The Basics First
What is an ICO?
ICO is short for Initial Coin Offering. The word is very similar to IPO or Initial Public Offering. Just like an IPO, an ICO is also basically crowdfunding. In an IPO, a company offers equity in the company in lieu of the money from the public.
In the case of ICOs, a blockchain company also attempts to raise funds by offering tokens to its early investors. Mind you, the term ICO is limited to the public offerings that are made by blockchain companies. They have an idea for building a blockchain product like Bitcoin, Ethereum, or any other application.
These companies do not raise capital from a venture capitalist or seed funds, but ask the public for the money they need to get their product rolling. It is a great way to engage with the community and also gathering funds from the people.
But, like IPOs, ICO’s are not really giving out the control of the company via these coins. They are just offering tokens or cryptocurrencies of that platform.
Why do people accept these tokens at ICOs?
When contributing to an ICO, the investors look at the developer profile who is building the product and also the growth potential of their application. First of all, a well-known developer will, most probably, come up with a good product. Secondly, the investors anticipate that the project will generate more interest in the future because of the solutions to it provides to various problems.
In that case, the value of the tokens they hold will go up over time. Most importantly, these investors get a great deal with these tokens. They get them for pennies. It is the company’s way of incentivizing its early investors and attracting more parties to their ICO’s.
So, in the barest of terms, these investors are taking a leap of faith that the token value will rise and they will be able to earn handsome returns.
What kind of returns have ICOs seen so far?
That is a really good question which has a really powerful answer. Bitcoin is the most popular cryptocurrency today. But, at tens of thousands of dollars, it is not in everybody’s reach today. But, the story was starkly different t years ago. If you had invested $100 in a Bitcoin back in 2011, you would have received some 333 Bitcoins.
In 7 years, those bitcoins have climbed up pretty high. Your $100 investment would now be equal to approximately be equal to a little over $4 million. Those $100 and a 7-year wait worked out pretty well. Didn’t it?
Similarly, Stratis is a blockchain based startup that held an ICO in 2016. They offered Stratis coins to their initial investors at the ICO for a price of $0.017. Stratis has climbed up to more than $14 today. It has been just one year, and Stratis has already made its ICO investors millionaires.
It is amazing how quickly this investment showed returns. There is no other investment like it. There are people who would have still made money after buying Stratis from exchanges. But, the ICO investors got the best deal.
Make Money With ICOs
Undoubtedly ICOs would have piqued your interest by now. But, you need to know certain tricks of the trade to enjoy any kind of sizeable returns from investing in an ICO. Here is a list for you.
Look at the White Paper
Never underestimate the power of research. It can truly make or break your chances of becoming a millionaire. Do not start blindly investing in any and every ICO that you can find out there. You will not only waste a lot of money on useless tokes, you will also not have enough money to invest on the good ones.
Each company publishes a white paper about the cryptocurrency when they introduce it. This document has all the information you possibly want to know about the cryptocurrency. Obviously you cannot read the white paper for every cryptocurrency.
Gather Information about the Promoters
Before investing your money, make sure that you have had a look at the promoters of the project. Search for them online, find chatter about them on the cryptocurrency platforms and find out about their past projects. A founder who led his last company to bankruptcy is probably not the right person to trust with your money.
The reason is simple. Strong founders or developers will not only build solid projects, but they will also create good press for the project going forward. Good publicity will get more people interested in the cryptocurrency, increase its demand, and hence its price.
Also, a better management team will make sure that big corporations get behind the project, which is again good for the future valuation of the cryptocurrency. If you invest in a better founder, you have a better chance to get better returns from your investment. It may sound very obvious, but most people skip this very basic step and end up losing their investment. So, make sure that you know who you are trusting with your money.
Look for Pre-ICOs
Blockchain companies need the money to keep their platform thriving. So, they are always looking for investors and they are ready to incentivize them as much as possible during these early stages. ICOs are usually preceded by pre-ICOs, during which the company offers some great discounts to its earliest investors.
Recently LiveEdu held a pre-ICO. The minimum amount of investment required was a measly $3. But, there was an offer on the table. Those investors who made an investment of $50 or more were eligible for a discount. And not just any discount. A straight up 25% discount. So, the investors who invested this sum, got more bang for their buck.
Trade in Installments
When you get a cryptocurrency in the ICO offering, it is very difficult to predict how the cryptocurrency is going to do on the market. The reason is that the currency is really young and it needs time to make its presence felt. But, as an investor, you should always think about buffering all your investments.
So, once you get the tokens after contributing money at the ICO, make a sale. Sell the 30% of the tokens that you have received. Already you have paid the lowest price, and with the selling you will be able to recover some part of your investment. The rest of the 70% is the risk you are taking.
Hold On to Your Investment
You have anyway received the token for pennies, thanks to the ICO. That is usually the case. So, the gross amount of initial investment is anyway low. Even then, you have secured back 30% of your money. Now, hold on to the 70% that you have.
There are definitely a lot of ups and downs in the cryptocurrency market, but you should study the developments that impact your investment. Also, always keep tracking bitcoin. As it pulls up, the value of another currency also goes up with it.
The most important part is – Don’t Panic.
All you need to do is keep your fears aside and not sell the coins when the price is dropping. You will never be able to make money in the market if you panic. So, keep your head in the game and make a sale when you see that there is a lot of conversation happening around the cryptocurrency you have invested in.
Cryptocurrencies are creating millionaires, even billionaires today. Even people who are buying the cryptocurrencies from exchanges are able to make a profit. ICOs are where it all begins. With a little effort, you might be able to recognize the winning projects in the bud. Don’t wait up for a cryptocurrency to become newspaper headline to invest in them. That is actually a time to sell.
Do your research and find the projects worth investing in yourself. Sure, you are taking a risk with an ICO. But, even if you are right about just one of the projects, then you are looking at making some really serious money on the cryptocurrency market.