Should you invest in ICOs?
Yet another shock has landed on the cryptoworld. Yesterday a new coin emerged called the IOTA. It opened at sixth position on the coinmarketcap, without any proof of anything. I have no idea how much people have initially paid for it in it's initial coin offering (ICO), but to me it seems like that kind of position is not warranted for a completely new coin without any proof of working.
This kind of incidents are extremely hazardous for the cryptocurrency world, why? Well just think of it, what will people do about the next promising ICO? Over invest in it. What will be the purpose? Quick profit. What will this lead to? Crash. When this happens a few times with currencies that reach the top 10 position, people who are not familiar with the cryptocurrency world will panic and get out. This will cause a massive drop in every cryptocurrency. Many new people will loose their money. This kind of situation has been observed multiple times with the stock market. Benjamin Graham observed this and wrote about it in his famous bestseller The Intelligent Investor, which is often referred to as THE book in investing. When people start buying initial stock offerings without giving a good look at the stats, that is when everything becomes unstable.
However, earlier I wrote a post about why you don't need to care about a cryptocurrency bubble, you can find it here:
My post explains that it might actually be a good thing that worthless coins will be eliminated and the strong will survive. This will eliminate the worthless ICOs bound to happen. I'd like to take this moment to point out that I actually have no idea if this new IOTA is good or not, they say that it has great new tech, etc. But seriously, do you just take the word of others and invest before you even see if it works or not? Especially in a market which is full of scams.
Why are ICOs a great opportunity for scams? Well, the person who invents them can say that they are inventing a new thing which will revolutionize everything and you have a chance to buy in on it. From where I come, we have a saying, "don't buy a pig in a bag", meaning that you should always first see that it is actually a pig you are buying! Now as explained before, this kind of examples of great ICOs will make people want to invest in upcoming ICOs, but unless you are absolutely sure you want to put your money into the pocket of a random person and trust them with it, you probably shouldn't participate in the upcoming ICOs even if they offer you the sky. Someone always looses if people pay too much. Also btw, ICOs offer a great opportunity for pyramid schemes, where new people make the old people richer, and eventually the newest members will be left holding the bag worth nothing and the original people are rich.
Great article, it's frightning that people are investing entirely based on hype or with a FOMO mentality. Investors should educate themselves on the technology they are investing in and decide if it has a place long term in the crypto space. When the bubble bursts and the dust settles only those holding strong hands in viable technologies will survive and make long term gains.
Agree 100%. Any investment not only on crypto needs a research and a strategy when to come in and come out. Once you have the strategy and leave the emotions out in the long term your gain will be bigger and the loss much smaller.
That is true. Hopefully too many people won't loose their money.
I agree @wealthy-easily, basiclly people over invest on new blockchain tech without realizing that 90% will crash.
Looking at the dot com bubble, most of the big companies started after the internet worked and was used. Google and Facebook weren't pioneers, They "imitated" and improved the pioneers. The FOMO is real and understandable, I just prefer to invest my money in a company that actually has value and their value is not just based on hype and speculations.
Yeah, and according to Graham this kind of bubbles already happened a hundred years ago in the stockmarket. So nothing new there.
Very interesting and intriguing, i am new to crypto, where do you come accross info on new coins? Do you have any recommendations on bezt places to get information on current crypto before investing?
I am putting out reviews of companies see: https://steemit.com/cryptocurrency/@wolfofcrypto/iconomi-the-sleeping-giant
https://coinmarketcap.com is a good place to start. You can see which currencies have the biggest support in terms of price and volume. You can also find links to official pages of the currencies and social sites where the community discusses things. It can be challenging to find a good currency, but the time you spend understanding what makes a good currency is probably worth it once you decide to invest. For me personally the development team is the most important indicator of a good currency, but that is just my opinion. :)
Awesome thank you!
So if iwanted to invest in a new crypto, like EOS how would i go about it?
You would probably have to buy bitcoin and then buy EOS with that. You can also find the exchanges that have the currency from coinmarketcap.com
Nice post. On the other hand since ICOs generally use smart contracts, the rise of ICOs has driven the price of Etherium. Definitely not all ICO projects will succeed, and that is made clear by these companies in their prospectus. There are no promises made except for the dividend schedules and possible tradability of their tokens. I have not invested in IOTA but I did invest in Polybius and Mona.co whose ICOs are still ongoing. I believe in their projects thats why I invested and only the amount for which I will not cry over if they fold.
Yeah, by no means do I say you shouldn't invest in any ico, but you want to be extremely careful doing so.
Yeah, Prudence and due diligence are such hard lessons to learn :)