The ICO puzzle – When to invest in cryptocurrency startups

Altcoins tends to loose market value immediately after ICOs. A study of the top 25 altcoins with the highest market caps indicates that you should wait 1-3 months before investing.

It seems that ICOs are popping up left and right at the moment. So I asked myself, is it something I should invest in, and do I need to move fast?

I had a bad case of the good old FOMO (fear of missing out), and that is not good at all because I need to keep my head cool if I am to succeed as an investor. So I checked out some whitepapers and watched some YouTube videos and decided that I couldn’t come up with a definitive answer.

That's why I decided to do this study. And now I’m sharing my results with you guys in the hope it can help you along the way to financial success. I think however that we should start from the top by explaining what an ICO is.

What is an ICO?

For those of you who don’t know what an ICO is, here is a short definition. An ICO is an Initial Coin offering by which Blockchain companies raise startup capital for further technological development of their cryptocurrency. Investors pay the company X amount of money in exchange for newly created cryptocurrency and the ICO ends either when enough money is raised or when a set time limit is reached.

The companies who launch ICOs tend to publish a white paper wherein the purpose and plan for the cryptocurrency is explained. I will put links below to some of the cryptocurrencies with the highest market cap. I think you should at least read Satoshi Nakamoto’s white paper on Bitcoin. It will give you a basic understanding of why cryptocurrency was invented in the first place and what Nakamoto thought Bitcoin should be used for.

The cryptocurrency market is worth more than 100 billion US Dollars

The cryptocurrency market is at an all-time high with a market cap of more than a 100 billion US Dollars.

Source: https://coinmarketcap.com

Likewise, the amount of money raised on ICOs are higher than ever although the actual number of ICOs is declining. This means we are seeing fewer ICOs but they raise more capital than before. For instance, Gnosis just raised 300 million US Dollar in 2017, while Ethereum, which is the blockchain Gnosis runs on, raised a meager 18 million US Dollars in 2014.

Source: https://www.smithandcrown.com

An analysis of the top 25 altcoins

While the cryptocurrency market is at an all-time high, this doesn’t mean that you should sell everything you own an put it into an ICO. I have analyzed the top 25 altcoins according to market cap and the results are pretty clear. But let’s take a look at the charts first. I have chosen only to show the first six months of price movement, this means that my study doesn't show the curent status and the altcoins true evaluation. However this will be enough to prove my point regardless. If you don't like charts I suggest you skip them and just read the conclusion.

NB: The following top 25 altcoins are not included, either because of lack of info or because they didn’t have an ICO: Ripple, Litecoin, Bytecoin, Golem, Sia, GameCredits and Bitshares.

Conclusion

There is a couple of good reasons to buy early. Sometimes early investors get a discount or certain privileges before the ICO. If this is something that suits your temperament, then I think you should go for it. It’s also worth to mention that by joining early you help finance the development of new techs which in the end could help benefit all of humanity. If that’s the case by all means should you invest early and hold on to your coins for the long run.

But if you want to make a nifty profit, you should always go for the ROI (highest return on investment). Most ICOs see either high upwards volatility followed by a steep dip in price or just a dip within the first 3 months. This could indicate that initial investors tend to take home their profit immediately and simply dump their altcoins on the market. This would not be the time to enter the market if you seek short-term gains. It would simply be too risky. It would be much better to wait 1-3 months after the ICO and then buy at a bargain price. In most cases, the top 25 ICOs have all begun to rise after this 3-month period.

List of ongoing and starting ICOs: https://www.ico-list.com/
ICO definition: http://www.investopedia.com/terms/i/initial-coin-offering-ico.asp
Bitcoin white paper: https://bitcoin.org/bitcoin.pdf
Steemit white paper: https://steem.io/SteemWhitePaper.pdf
Ethereum white paper: https://www.google.dk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0ahUKEwjEnpLWyq7UAhWiPZoKHemHD9sQFgguMAA&url=http%3A%2F%2Fwww.the-blockchain.com%2Fdocs%2FEthereum_white_paper-a_next_generation_smart_contract_and_decentralized_application_platform-vitalik-buterin.pdf&usg=AFQjCNFqqwRblfP6VPWxpdubUqeuPihiCg&sig2=ZCze-2ytJU0nJejZt9sf3g&cad=rja

Thank you for reading. I hope you can use the info for your own investment strategies.
Your comments are much appreciated and feel free to ask any questions