What about ICO's

I have looked at investing and how you can trade crypto. While the returns are conceptually very high we see there is risks and one must manage and mitigate these. With the run Bitcoin (BTC) has had I have made lovely returns by playing daily moves, but there is always the risk I get caught in a crypto slump. Or this may even be a bubble, you never know. Remember that and that the rule is DIVERSIFY. And also remember, these are my views AND NOT ADVISE.

Buying low
One great way to avoid being caught buying high in a bubble (when a price is inflated and you are essentially buying when you should have been selling), is finding very cheap buys. This is how an investor like Warren Buffett made his billions. Find the gems, buy low and hold. With BTC if you by now at $5500 a BTC, EVEN if it does go to $10 000, you are buying high and only make double. That is a big even if. But if you buy into an ICO (such as the one I am involved in, @sportspodium), you typically buy really low and look at making many multiples (the number of times you make your invest back).

Image Credit

Very High Risk
Let us be clear, if you do not know what you are doing, then this is extremely high risk. That is why in the fiat world you get fund managers to do this for you and pay them to live the high life, own boats and travel the world with what they make for you. Even if you DO know what you are doing the whole path is lined with major risks and obstacles.

Right now I believe 1/3 ICO's are just scams, either selling something that does not exist or can not exist, or trying to raise so much money that everyone in the ICO will get so rich that they never have to deliver anything. Of the remaining 2/3 I believe at least half (that is the 2nd third) can and will never work because the idea is poor, the people involved have no experience or the plan is just not well put together. That leaves you with 1/3 ICO's you should even start to look at, and that is best case!

Image Credit

How do you know an ICO is a scam?

1. Look up the people. Are they real. There are great examples of stolen identities being used.
2. Talk to them. If they have no slack or telegram group, or other place where they actively engage, stay clear.
3. If they make claims of people involved, successes or achievements, ask for proof. Do not fall for "my team of investors" as we have seen in recent property ICO scams.

So do your research! If it looks weird walk away.

How do you know it has a chance?

1. Ask for the business plan. Does it have revenue streams.
2. If you want to make a quick turn, will they be able to create post ICO hype to push up coin value
3. Does the team and their advisors have experience in crypto AND business.
4. ASK about their track records.
5. Do they have the technical skills to execute.

Image Credit

When a ICO launch the team will never have all the answers, but talk to them and understand if THEY understand and have thought about the challenges. If you want to hold for the longer term, then you are investing in the team. Talk to them. Normal business rules apply, but understand how they will run the token economy (inflation, money creation, etc). And how will they drive demand for the coin. Do they have a marketing, operation, IT and financial plan. Are these feasible?

Can it work?
Even if all of the above is true you need to ask one simple question. Will the coin value increase? Also, you need to understand if you are going to come in and sell early (the so called pump and dump) or do you see long term growth. These will make various answers you get from the above more or less important.

Very High Reward
IF however you do get good ICO's you can earn major rewards for relatively little money. Like those guys that got into Bitcoin or Ether when these were below 50c or a dollar. IF you put $1000 into BTC you now would have more than $5 million!. And more than $300 000 if you did the same with Ether. And many got in at 20c and made 5x those returns meaning you could retire on a $1000 investment!

Let us look at the maths. I will use @sportspodium ONLY as an example. I am not at all saying that you must run out and buy now, although we believe in all the numbers and statements we make.

The team will set a price for their token, in this case a POD is set at 10c US to the POD. There is not that much science behind this but you can compare this to other Tokens at launch that has similar number of coins being issued. This normally will be at a price that is not to low so as to affect market perception, but not to high as they point is giving your ICO investors major growth.

Image Credit

Then you typically have two phases in the ICO. Pre and Main. And each will have a bonus structure, meaning you get more tokens for the money you spend. In SportsPodium there is a 100% bonus for the pre sale(s). The reason for this high bonus in the pre sale is that investors take additional risk, that for whatever reason the ICO does not successfully conclude, they will lose their money. ICO investors a) know there is an ICO happening and b) get their money back of the soft cap (the minimum an ICO sets in order to declare it successful) is not reached. So at a 100% you will effectively get a POD at 5c! Way below what the team believes the price should be on an exchange at launch.

Then you get bonuses in the main ICO too, based how early you buy. IN Sportspodium there is a 25% bonus for the first 1/3 Ether, 20 for the second and 15 for the last. 25% means you effectively pay 7.5c per POD.

Once the ICO is on an exchange you can now start trading. Typically when the ICO finnish there is media hype, creating demand, and the big buyers will help with this. Many good ICO's climb very fast and then the pump and dump guys take their profit. You can see a token like a POD climb to $1, $2, $3 or even$4 in a week, depending on the hype created by the team, but as there will be many sellers it than can go down as low as 5c quickly! Do not panic when this happen, especially if you are a long term investor. By creating success and launch the solution and product, this will then steadily climb over time. You could even buy more at those low prices.

In the SportsPodium case we believe that through the major media coverage and big name starts we will get post ICO we will not fall below our list price, and with our quick to market strategy and ability, we will grow our community very quickly, creating major demand for PODS. In the pump and dump you should get about $2 for a POD, using Steem as a case to base this on. So if you spent $1000 in the pre you will have 20 000 PODS so make $40 000 in a couple of months.

Image Credit

With success in growing the platform users and profile the POD value should go up to around $5 in year 2. So that $1000 will be $100 000. IF it goes to $20, you are looking at $4 000 000!

What will drive the price? Project success, marketing and a solid business case. Steem has NO demand creation, a basic interface and very little media hype. And it has less than 1m users (less than 100 000 daily users) after more than a year. Yet its price sits around $1. So look for a project that will have REAL demand for their tokens, REAL media and marketing hype, and STRONG membership and user base potential, and you will have a diamond that can easily take the token value to 5-10 x that of Steem.

So you can make massive returns on a small investment in an ICO, but there is major risk that YOU must understand and mitigate as best you can. A good strategy is probably investing in a few ICO's to spread the risk. You will make less if one "wins" but you have a smaller chance to lose all your money.