The cryptocurrency world that has become, more or less, very mainstream over the last 4-5 years. It is spreading and getting huge, and connecting all over the world. Today everyone has an idea about “blockchain” and definitely about “Bitcoin”. Lately, however, one term has been gaining more and more mainstream attention. That term is “ICO” or Initial Coin Offerings and has raised OVER $1.3 Billion for Blockchains based start-ups.
As the name involve, ICOs are inspired by standard initial public offering (IPO), although they are very different. The simplest way to understand an ICO is that it Abide by crowdfunding on top of a Blockchain. Investors buy tokens which are typically meant to be an essential part of the application that the start-up wants to build.
The right to ownership or royalties of the project is offered to inventors in form of a digital coin as an exchange for legal trade or other cryptocurrencies.
Cryptocurrencies or Virtual currencies are the digital money that is neither issued by central back/Public authority, nor is necessarily attached to a fiat currency, but is used and accepted among the members of a specific virtual community. They are only capable of being transferred, stored or traded electronically.
Why is it good to invest in ICO?
ICOs have the potential of being a powerful force in the development of open-source blockchain technologies. ICOs are popular for multiple reasons. And apart from making the profit on the coin. It also gains attraction in the market as well, we also get profit from the services the company provides in the travel industry. ICO is attractive due to the volume of the audience and the speed of fund-raising, in turn, ICO promises a high profit for investors, which you can take a chance.
The ICO model generates positive network effects that can vitalize and strengthen decentralized applications that require numerous users (or operational nodes).
The reason to invest in ICOs may be the possible high returns. Here are of some examples-
The most profitable ICO at the moment is the placement of STRATIS from June 2016 to September 2017, these tokens showed a yield of (more than) 151,082 percent.
SPECTROCOIN, Since November last year, its cryptocurrency has grown in price by 18,700 percent.
STORJ, decentralized data storage service) showed an increase in the price of tokens by 12,000 percent.
Golem, which tokens in less than a year rose in price by 5000 percent.
Pros of ICO ’s:-
• Gives opportunities to the promising project.
• Doesn’t require unnecessary paperwork.
• Community building.
• Exposure for the project.
• Early access to potentially valuable tokens.
• The incentive for information.
Therefore, although it may appear to some that Bitcoin, and cryptocurrency in general, is an easy way to make money, it is not as easy as some might expect without the requisite knowledge.
But it seems to be the best time to invest in Bitcoin, as due to the latest turmoil’s, it is as at one of lowest price. You can get more Bitcoin than a month back. Even after all the issues settle down the price is expected to increase back to glory.
Case in point, a Delhi man who invested a total amount of ₹6.3 lakh in Bitcoin at the beginning of 2017. Less than a year later, the gentleman who has chosen to remain anonymous, has made close to a crore!
Risk of investing in an ICO?
The foundation of blockchain technology is a digital ledger, which uses a chain of distributed computers to record each and every transaction in a public manner. It is secure, and it enables digital transactions for virtual goods, games, and online entertainment.
There are a number of people who are worried about the future of Cryptocurrency. Many scam artists have moved into initial coin offerings (or ICOs)
The main risk of investing in an ICO is that you may lose money that you have invested in ICO. Investment on ICO is a risky job since most of them are in the promising state that even many don’t have any platform or project. People are investing in ICO to get profit. But it depends upon the team behind an ICO. A full clear study and experience are required in ICO invest.
One’s mind gets surrounded by many questions as we think of investing in ICO. Should I invest? Is this a good way to get rich quick? In the case of most ICOs, the answer is no, but still, there are occasions when the answer is yes. As with all high-return investments, buying cryptocurrency is risky, and ICOs is riskier still. And as with all active investments in general, it is wise to never commit more money than you can afford to lose.
There are tons of risk associated with giving companies too much capital without strong governance. There are future financing risk and exit risk as well. Many of these companies raising funds through ICOs are closing the door to traditional M&A exit paths, and need of capital in the future will be shut out most of the major forms of traditional financing. Once you do an ICO it may be the last financing a company ever did. If everything goes well and the tokens still have value in two years, then maybe it works out for a few, but a majority of these will probably run out of funds and are left without options.
Several ICOs are introducing nowadays and not all of them are genuine. One should look for a good ICO to make their investment profitable as one can check it by their white paper if things seem to be reasonable then that ICO might be genuine. Check if tokens are available on top cryptocurrency sites such as Ethereum. If they are not available then don’t invest in such ICO.
As we are talking about investment here, let’s just be clear about what is the difference between investment and trading. While trading aims at frequent buying and selling of assets to take profit from market price changes, the goal of investing is to build profits over an extended period of time by buying and holding the assets.
Things to keep in mind before investing in any asset are-
Volatility: How much the asset is moving on a daily, weekly and monthly basis
Risk appetite: How much amount you are comfortable in loosing completely.
Diversification: How much investment you have already made in different asset classes like real estate, stocks, bonds, funds, etc.
4.Understanding: How well you understand the asset as a product, its features, the problem it is solving, potential buyers, market size and technology it is using.
If, one had developed a good Understanding then it will be a lot easier for you to understand the pros and cons related to investing in bitcoin yourself. So what’s important is, gain knowledge before investing.
As we all know that 2017 started with a bang as bitcoin shot through the $1000 mark without going down. When one is planning to invest in Bitcoin. Remember it is not a company or a stock. It’s a currency.
The monthly trade of Bitcoin in India is estimated to be between 5,000 crore- 10,000 crore and an average of 2lakh people register on bitcoin exchange every day.
Many of us our not aware about the fact that, both central bank and government has issued several warnings against investing in bitcoin, as the central bank had not given licence to any company to operate such currencies in India. And so there are no such rules to govern them. They say that there is no protection of investor’s money in the bitcoin trade.
Legal infrastructure may come to cryptocurrencies eventually, but we are not there yet.
Never jump into an ICO without first thoroughly examining the team behind it and the white paper. Also, check if you can find reviews. The fact is there can't be a sure-fire ICO. But any ICO that has a meaningful project behind them would be a good pick.