ICO's are here to stay, they just need to evolve and will become one of the best vehicles for developers. However the returns generated back in 2017 were just insane and many people who "Got Wealthy" no longer see 20-30x as a decent ROI or are willing to wait/hold for 12 months or longer. I personally still invest in ICO's as there are many great projects, but you need to do a proper due diligence rather than gamble your money away.
Here is how I do it in 5 steps (this is part of an article I wrote recently, but haven't published it yet, so it's an original content):
1. Real Use Case
With the enormous amount of value exchanging hands over the blockchain and the prospect of getting
"free" money, it's not hard to imagine why many scammers, online money makers and existing companies
try to identify any possible reason to launch an ICO campaign.
The first thing you try to find is a legitimate reason for having a token. Meaning if what they claim their
token will do can be done without it, the future isnt bright. Even with the best marketing during the ICO,
after the sale is over useless tokens are simply useless.
2. Token Distribution
Is the number of tokens offered to the public more than 51% of the total amount generated? Is there a
maximum one can invest? If not, this isnt a decentralized token economy. It means that the founders or
few whales hold the biggest bags of coins/tokens and can easily manipulate the price.
This is how most Pump N Dumps are happening and trust me it is very frustrating If you have some of
those tokens and patiently waited for the end of the ICO hoping to make some profit. When the founders
are associated with whales the last thing they do is protect regular investors interests.
3. Use of Funds
Do they describe how the funds will be used in detail? I havent seen an ICO aiming for less than few million
dollars and dare to believe that even teams behind the most successful campaigns are great marketers,
but not very experienced in finance management and business execution.
So, besides the use of funds section in the white paper you should check the team (not the advisors) for
someone with finance background as well as someone with experience in the field the project is focusing
after the ICO ends.
4. Price Appreciation
Even if you analyzed everything the project has experienced team, real use case for their token and shows
what they will do with your money there is one thing that is probably the most important from investors
point of view. What will drive a price appreciation?
The price always depends on demand and supply. So first you should look at the total supply (if any) - the
lesser the better. Although in most cases this is based on assumptions you need to check on the token
circulation or how many tokens will be used in the ecosystem if the project succeeds.
5. Liquidity
Of course, like with any other asset the one factor as important as the value is liquidity. If the token is al-
ready being utilized major exchanges will certainly accept it. Once exposed to millions of crypto traders its
price will significantly increase and you can sell it in few seconds.
It is better to hold a token for 12-18 months until it is utilized and get listed on major exchanges with big
trading volume, rather than buy a token that will get listed on Micky Mouse exchange right after the end
of the ICO with no demand for it.
I hope it helps and good luck with your investment.