Recently, I was encouraged to write an article going over some of the ways to stay safe while buying, selling, and owning cryptocurrencies. This seems especially relevant in the current climate in which numerous ICOs are out there vying for new investor money. While we have written on topics like this before, it is important to both educate newcomers and remind veterans.
Ultimately, the onus of staying safe in any market — crypto or traditional — rests solely on the investor. That being said, here are some of the things I look for when determining the validity of an investment opportunity.
This should be a pretty obvious one for anyone who has even heard of ICOs. While most projects have them — and if they don’t, be very suspicious — not all whitepapers are the same. Just because a project has one does not mean that it was 1) well thought out or 2) even aligned with the goals of the project.
I realize these can be a little long sometimes, but it is imperative that investors understand what they are putting their money into. Take the time, do your homework, read the whitepaper, and be able to explain it well to someone else before ever considering throwing any amount of money at it.
Another obvious aspect to explore is the quality and security of the ICO’s website. It doesn’t need to have the most amazing design or user experience, but make sure the team has put in the work and that they have SSL certification or some other form of security certificate on their site. While design and security do not guarantee the project’s validity, they can be a good way to gauge its overall seriousness.
Most projects should have some sort of a social media or community manager keeping their various web presences healthy. Check those out, pose some questions, or just interact with them. This could be another way of determining how serious the project is.
I say this with an important caveat: not all endorsements mean much and not all projects without endorsements are worthless — with Bitcoin being an obvious example of the latter. However, if you see big names in the blockchain space supporting something, it may give it more clout than support from Paris Hilton or someone else not affiliated with the space.
Remember the DAO? Of course you do; we all do. Auditing helps avoid future DAO-like fiascos, but cannot guarantee success. ICO projects should be audited multiple times by well-respected security researchers. If you don’t know the names of the researchers, look them up, and check them out. Who a project chooses for its audits speaks volumes about how much they respect their own project.
These are just a few of the things that I do before making a decision on how legitimate a given project is; it is not an exhaustive list. Remember: This is not investment or trading advice; you should always conduct your own independent research.
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