Do Due Diligence Before Investing in ICOs…

By | November 26, 2017
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Don’t Throw Your Money at Every ICO that Makes Headlines!

I’m concerned with new ICOs that attract a lot of investment from people who’ll just throw money at any ICO in the certain knowledge that some of them are bound to pay off, more than compensating for the ones that fail. But the thing is, even a cursory look can tell you that some of them don’t have much of a chance, even if the founders believe in them. Do you ever throw a coin into a wishing well? It’s a feel good thing, right? But do you ever really think your wish will be granted?

Is ‘HLTH’ a good bet?

For example, Simply Vital Health (HLTH) Introduces blockchain technology into healthcare. It augments current customers’ infrastructure using existing data, but at a cost. And that’s the thing. Healthcare providers are already cash-strapped. They won’t even pay an extra few bucks to get 3D images from their ultrasound machines. So I feel HLTH is a big sell, as any change in healthcare infrastructure always will be.

Everyone is Getting into Blockchain Technology.

It does show you though, that existing companies who are already successful are trying to profit from smart contracts on the blockchain. It’s just that no matter how good an ICO looks in its white paper, the ‘business case’ matters a lot.

And the question is, does it matter to the founders of the ICO? If they can raise tens of millions, keeping, as they always do, say, 15% for the founders, they’ll become rich even if the ICO fails to pay off when the tokens are issued. Do they care? Most people who make millions will quit their job anyway…

I’m not saying that this is the case with this venture of Simply Vital Health, but I will be surprised if the tokens do well after the ICO. However, it might take off! They are certainly building on a successful business. So the question I suppose becomes, can you just take any successful business and create an ICO on its backbone? As well as obviously being on the Ethereum backbone…

Does it make Business Sense?

The answer again, is in the business sense it makes, for investors rather than for the founders of the ICO. Are we going to eventually see almost all businesses developing their own smart contract? Currently, for larger businesses, it’s worth it, because the pre-sale and the ICO will make them millions.

But for the investors: the people who throw money at these new ventures in the hope that the tokens they receive will take off, it’s a different matter. Most people are going to lose out, because they don’t know enough about the motivation of the teams involved, and it’s not exactly a transparent process. What goes on behind closed doors, often stays behind closed doors.

Do your Research!

The one thing I would say is that if the White Paper and associated documents of an ICO show all of the proceeds of the ICO being used for team rewards, miscellaneous activities, and marketing, and there is no amount of the money raised going to back the value of the tokens issued, then you’ve got tokens worth nothing.

You might get very enthusiastic about an ICO, and put $100,000 into it. What you could get out of that is a million new tokens with a market value of zero. So be warned, be prepared, and don’t be an idiot with your money.

There is Value to Being Already Established.

But do remember that not all companies creating ICOs are crooks. At least when it’s an established company doing it, instead of a group of coders meeting at a pub and deciding on a get-rich-quick scheme, you know they are not going to disappear with your money. Yes their ICO could fail to live up to its expectations, but you can bet that with an established company behind a new ICO, they’ll do their best to make it work. Their jobs might depend on it!

You can make a fortune with the right ICO.

You can make a fortune with the right ICO.


All that said, I feel that it’s a great idea to have a diversified cryptocurrency portfolio. Bitcoin is obviously the big one, then Ether and Bitcoin Gold, perhaps, but as for the rest, a mixture of at least ten altcoins that have already been through their ICOs and have good market cap and good backing, is the sort of thing I might suggest to a friend. As well as watching out for good up-and-coming ICOs.

So you are mixed up now right? Well, that’s how it should be, because you have to make your own mind up about these things.




Disclaimer: As usual, I have to say that this essay is purely my opinion and not in any way investment advice, because I don’t do that. I don’t give investment advice on this website. I don’t analyse opportunities either. I sometimes criticise. I make mistakes. I predict. I get things wrong sometimes. More often, my version of wishing on a star brings me luck. And I’m not in the least superstitious.

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