As a blockchain or fintech investor, you have to keep up with the pace of the ever-changing market and investment opportunities. Two years ago, ICOs had dominated the fintech industry, especially the blockchain/cryptocurrency space. Any blockchain startup could easily raise funds through an ICO as long as the development team came up with a convincing whitepaper that proved that the underlying project was viable. The startups benefitted by acquiring the capital needed while investors benefitted by making profits from the sale of the tokens at a later stage or using the tokens in paying for services connected to the project.
However, since 2018, ICOs have continually become less attractive to investors, especially due to scammers taking advantage of the lack of proper regulations on the ICOs. Instead, investors are now running for IEOs since they have some degree of safety. Though STOs are safer, they are yet to pick in the industry probably due to their strict requirements and IEOs have stepped in to fill in the gap.
But how do you go about investing in IEOs to ensure that you make the most profits? How can you be sure that the IEO is profitable or not?
Below are the number of things that you should consider as an investor before commit yourself in an IEO:
- Do thorough research about the IEO
You may wonder why the research and the project have already been Okayed by the exchange platform that has better experts than you. But remember, the Exchange does not look too much at the end result of the project. The exchange is only concerned with whether the project is genuine and whether its users will be attracted to the IEO token sale. The exchange is in business and it has to find something that will be well received by its customers. Therefore, it is paramount that you do in-depth research about the project itself to find out if it is a viable investment opportunity.
As you do the research, you could try to find answers to the following questions:
- Does the project seem to attract the interest of the general public?
- Is the project a new concept or just a copy-paste?
- Who are the people behind the project offering the IEO?
- How experienced are the members of the development team?
- Is the exchange listing the IEO reputable?
- Is the exchange secure?
- Has the exchange been involved in any malpractices?
- What is the history of the exchange in line with IEOs?
Always remember that the exchange is also looking for profits from the IEO token sale. Therefore, don’t just rush to buy the tokens, do a background check on the project first.
- The work that the development team has done so far
You have to look at what the team behind the project has done so far. You can’t just invest your money into a project that is not yet started; it might end up not starting at all. The software should be completed. You should be able to look at the program to verify if it will indeed be applicable.
You should invest in a project that has already started and the team can show some commitment to the project. This shows that the team behind the project is serious about the entire project.
Things like a whitepaper, well-designed websites, and the development team must be there.
- The exchange that offers the IEO
Once you are convinced that the project behind the IEO is viable and looks to be profitable, you have to consider the platform where the IEO is launched. For security reasons, you have to look at the reputation of the exchange platform.
In addition, you have to consider the onboarding processing that the platform requires for you to participate in the IEO. Remember, different exchanges have different requirements for you to become an investor in an IEO. But most importantly, you have to be a registered member with the exchange for you to participate. You have to go through the entire registration process, including the KYC/AML process.
Since it may take some time depending on the exchange that you choose, it is important to do this some days before the actual IEO.
The common exchanges with IEO Launchpads are Binance, Huobi Global and Gate.io.
- How the payments are made
This is a very important factor. You cannot participate or invest in an IEO unless it allows you to buy tokens through a means that is accessible to you. Again, you have to consider the asset that the development team together with the exchange sets as the accepted currencies to buy the project tokens. Some of the most used currencies include Bitcoin (BTC), US Dollar (USD), Great British Pound (GBP) Euro and Ethereum (ETH).
You should also look at the processing time. How long does the processing take after making a purchase?
- The IEO tokenomics
You have to closely examine how the tokens are distributed. You have to clearly understand the number of tokens available. You also have to see what percentage is assigned to what.
One of the things that you should carefully look at is the percentage of tokens given to the development team. If the development team is given the majority share of the tokens, then that is a red flag. Most of the tokens should go to the investors so as raise sufficient funds for the project.
You should also closely look at the distribution of the funds that are raised through the IEO. How does the development team intend to distribute the funds? The development team should not be the one taking the lion’s share of the funds. Most of the funds should go to the project development.