What do you know about ICOs? I mean, what do you really know? You might have heard about them if you keep a keen eye on investment opportunities, especially as an alternative to venture capital investment.
And with all the coverage Bitcoin got in 2017, you’re sure to have heard about people who’ve made a fortune investing in this kind of opportunity. But are they really worth the hype? Are they a good investment? What are you actually buying? In this post, we’ll examine those things.
Are They Worth The Hype?
Probably not. There’s a lot of information flying around online about how ICOs work, and not all of it is good. The hype is reminiscent of the dotcom boom in the 90’s, and there is no doubt that the market is heading for a similar crash.
The problem is that there is very little regulation in place to protect investors, but it opens up the market for Bitcoin gambling, perhaps. Anyone can set up their own ICO very quickly and easily. Unlike with public companies listed on the stock exchange, there is no need to publish financials and very few legal requirements are needed to set up the company.
This is changing – governments are starting to crack down on companies that they see as acting dishonestly. In the United States, for example, we have seen a lot of cases where the SEC has started proceedings against companies that it deems to be in contravention of securities laws.
But it is still true that there are a lot of companies who play fast and loose with the facts or who don’t do their homework properly. A startling number of ICOs will fail completely, so they are certainly an overhyped investment option.
There Are Some Diamonds In The Rough
So, if you invest in an ICO, you are rolling the dice and the odds are stacked against you. Having said that, there are some ICOs that were built around solid business ideas and that have turned out to be worth a lot.
According to the editor of the review site, BTXchange, Spectrecoin saw a 35,175% jump in value since being issued. That rated it as the top ICO in terms of ROI for the first quarter of 2018.
You’ll be able to see more examples of spectacular results and fails by reading through the infographic immediately after this post.
So, to muddy the waters a little, some ICOs do make for a good investment.
What Are You Buying?
This is where a lot of rookie investors get caught out. Most of us consider ICO investing to be like your traditional stock market investment where you are buying shares in the company. As a shareholder on the stock exchange, you’ll have some kind of say in the future of the company.
With ICOs, all you are really buying is the token. Some companies do allow token holders to vote on issues pertinent to the company, but most do not. You’re not necessarily buying a stake in the company itself.
So, do you invest here or not? Our advice – consider your options carefully. We don’t want you to miss out on the next Bitcoin, but you could just as easily invest in the next BlockCAT. Don’t know what that is? Not many do, it tanked pretty spectacularly. Be warned!