The crypto market hit a major roadblock after China announced a ban on ICOs. To make things worse, the SEC also issued warnings against ICOs, asking people not to invest in them. Does that mean it’s game-over for the phenomenon that started just three years back because of Ethereum-based ERC-20 tokens? Experts believe otherwise. Ben Armstrong, one of the crypto industry experts, thinks that ICOs are here to stay, provided you don’t invest in the bad ones. He points out five red-flags to watch out for when planning to invest in ICOs.
1. Unreadable White papers
Ethereum, during its launch, set a standard by publishing lengthy white papers. Many ICOs follow that habit, but it’s not a good sign, according to Ben. While long and complicated white papers aim to make the project look credible, legitimate, and serious, they don’t necessarily achieve their objective. Ben advises you to choose ICOs that don’t beat around the bush. In simple terms, he means that if you can’t understand the terms and conditions in the white paper, you should avoid that ICO.
2. Ambiguous teams
Ben suggests investors take a look at the team members of the ICO before investing. Blockchain projects are quite complicated, and it requires a team of high-profile members to pull it off. If the ICO doesn’t have such members, then it’s better just to stay away. Advisors don’t make for the ICO’s credibility; it’s the team members that work hard to get the codes right. If the ICO doesn’t reveal its team members, don’t even think about investing.
3. Coins without actual use
Tokens represent a crypto project. And the entire ecosystem of the ICO revolves around the respective ticket. Ben, from his experience, says, “I notice investors working with tokens just because they want to invest in an ICO. You can easily replace that token with Bitcoin or Ethereum, and your strategy would still work. That means there’s no real use for the token. If you want to play safe, stay away from tokens that don’t provide much value and fail to showcase any real-world use cases.”
4. Complicated deal terms
Some ICOs promise massive discounts during their pre-sale offers to attract the attention of investors. This may be a trap to lure you into a deal that doesn’t provide high returns. It is always best to check the terms and conditions like trading options post-ICO, the value of tokens, the number of tokens available, and lockup and vesting opportunities. Don’t invest if you find the terms to be shady.
5. Aggressive marketing
Several ICOs try to create hype by advertising frequently on social media and Google Remarketing banners. Ben believes that most of these ads are not worth your time and money. He said, “I do click on some of these ads just out of curiosity. But none of them have offered me anything out-of-the-box. I think the best ICOs in the market get hyped for free. And you need to focus on those ICOs instead of going after these honeytraps.
It’s better to save your money for an ICO that would provide high and stable returns in the future. Follow the tips above from Ben to steer clear of bad ICOs so that you don’t end up losing money on crypto projects that are only in it for quick cash.