What should I be thinking when I buy tokens in an ICO?

Recently I have used Ethereum to acquire tokens in several coin offerings with mixed results. On the one hand I have seen my tokens triple in price and on the other I am watching them wither while I wait. This begs the question: what should I be looking for when I risk my ETH capital on an ico?

I do find I get caught up in the excitement of new innovations and am ready to part with my etha tokens on a goodwill basis rather than on a foundation of good sense. Recent experience though has taught me otherwise. When getting excited the best thing to do is step back and apply some sober analysis.

Will this company excite a wider public beyond the geeks?

Crypto technology may excite me but do other people really care? The popularity of a company will ultimately come down the actual application and how well it will perform once out in the market place. When planning to invest, one must ask: will this go large?

Who are team?

Going large usually means the company needs some experienced brains at the helm. It is important to take a look at the team who are steering the venture. Have they done anything remotely similar or of a similar scale before? Do they have scaleable expertise to cope with a rapidly evolving technology? Ask questions.

Is the product / application at risk from competition?

Some ideas are so great that they are destined to become the norm. In the blockchain space this seems to be a truism at every turn and more and more “experts” are waking up to the fact everyday. However, great ideas in a space like this need protection and a huge first mover advantage if they are to survive the early stages of development.

It is naive to think that the start-ups will naturally rule the space and be the Google’s of the future. Some will but many will be caught in the jaws of bigger predators and end up disappearing. And when they go, so do our unregulated tokens. Some analysis of staying power and risk from competition is certainly something to consider.

Is this short term of long-term?

Plotting the timeline of our investments should be in conjunction with the evolution of the company we are investing in. We need to plug in to their news and know their developmental timelines.

When are they going to launch the killer app or announce the new partnership? This kind of information drives stock prices so we need to know about it if we want to see our tokens grow.

If we bought because we genuinely believe in what the company is doing and that their mission will eventually bare fruit then we are typically looking at a longer term investment. However, knowing when to sell is still critical. I always expect to sell a percentage of my tokens when they hit a certain price point. Perhaps the fool in me likes to retain some tokens, hopefully the equivalent value of my initial input, as a gesture of support to the enterprise. Of course, that will depend on the news I am getting from them.

When do I sell?

If you are plotting your timeline then the sell point should become apparent. However, it maybe wise to sell a portion and claim back some tokens that can be used for other ico’s. We should also take note of the future potential of the company and if they know what they are doing, they will know how to communicate that to their investors.

A good example of this is the company Monaco who recently had an ico. The concept of their product instantly resonated. An app that linked cryptocurrency to a bank card that conducts money payments in any currency via VISA at the interbank exchange rate. That is a mass market product. The timeline states that they will be rolling out their card from the 31st August. Thats a real timeline. Let’s see what happens. If they miss it then the token price could plummet and lets have no illusions about the potential for a powerful competitor to step into this space.

Another company called Humaniq are very appealing because they have spotted an opportunity in purposing incumbent wealth via the Ethereum, to help the worlds poorest. This is not just a great business idea but it could both generate returns on investment while giving those who need it most access to finance. This is a business idea for the next generation. I hope they achieve their goals.

There are countless examples of ico’s that we can look at and analyse. I have tried to identify some of my criteria for assessing them in this post. If people have their own tips then please share. I’ll be taking notes.

Cheers