You would think that determining the risk of the investment would be one of the last parts of my analysis. Nope! It is the first. This is because it is the most important metric and I know how busy investors are.
They may not have time to dig through an entire analysis so I make sure to give the information they need the most in the beginning.
Anyways, I determine the risk of the investment by looking at various aspects of the company and its Initial Coin Offering:
- The group of people involved in the business and its ICO. Most importantly, any founders, co-founders, CEOs, etc.
- The ICO’s White Paper – this is basically a detailed mission statement describing what the business is supposed to do and how the investor’s investment will be used on the platform. This is usually done through exchanging the investor’s cryptocurrency investment for currency that can only be used on the platform.
- Minimum Viable Product – this can often be the difference between a successful company and a failure. It does not cost much to produce the Minimum Viable Product which means there will be more supply than demand most likely. If a company fails to adjust this and has no plan to increase demand, the company itself will go belly-up.
- The legality of the business – Look, no investor wants to put their money into a business that will be shut down by the government for operating outside of the law. I would surely hope that any business that does an ICO has a legal team on standby to deal with any potential legal problems they may encounter.
- The businesses and individuals they are partnered with. If a company is affiliated with any business or individual that has a notoriously bad reputation (no matter the industry), that definitely makes the investment more risky.
- The individuals that they receive advice from. I take a good look at who the company says are their consultants and advisers. The same principle for partners applies for advisers. If the advisers are notorious for bad business practices – that could definitely reflect on the new business and it certainly makes the investment a bigger risk.
If all six of these facets of a company and their ICO check out without any issues, I would conclude that there will not be a whole lot of risk involved in contributing to that company’s ICO.
Of course, there is risk involved with any and all investments, but if the company passes my test, then any risks involved would be market-based risks that can’t really be avoided or predicted. If the business does not pass my test, said business is most likely fraudulent and you should not invest a single penny in it. bitcoinexchangeguide.com