Despite its recent pricing gyrations, nearly everyone wishes they had gotten into Bitcoin when the popular cryptocurrency first got it start. Back then, with the price of the virtual currency expressed in mere pennies, the potential for appreciation was enormous.
Now that the cryptocurrency market has grown up, the price of the same Bitcoin, the one you could have had for a penny or two, is expressed in thousands of dollars. Given the enormous appreciation Bitcoin, Ethereum, Litecoin, NEO and other cryptocurrencies have enjoyed, it is easy to see why so many would-be investors are currently looking for the next big thing.
That search for the next big thing may be why the interest in the initial coin offering (ICO) market has grown so strong. In many ways, the ICO is the cryptocurrency equivalent of the initial public offering, or IPO, so familiar to stock market investors. The critical difference is that instead of shares of stock, ground-floor investors get rewarded in a brand-new cryptocurrency.
There is another crucial difference, however, between the traditional IPO and the much newer ICO. While initial public offerings for corporations are strictly regulated and tightly controlled, oversight of the ICO market is much looser, and in many cases nearly nonexistent.
While it may seem like a great idea to get in on the ground floor of the next prominent cryptocurrency, landmines litter this corner of the investment landscape. While many ICOs are legitimate, there are plenty of scams out there, and they can give even the good guys a bad name.
So how do you know if that upcoming ICO is the next big thing or just the latest in a long line of scams? Here are some vital warning signs that the ICO you are looking at is a wolf in sheep’s clothing.
A Thin Online Presence (or None at All)
Given the fact that cryptocurrencies exist solely in the virtual world, ICO investors would expect a robust online presence. Everything about the upcoming ICO, from the number of tokens available and the mining protocol to the distribution of assets and the technical details, should be laid out online.
Use caution if the ICO you are considering has a thin online presence — or none at all. If you cannot find a clear and concise explanation of the cryptocurrency and how it works, you should be prepared to walk away. At a minimum, you should be able to find a detailed whitepaper, a professional website and full technical details about not only the ICO but the new cryptocurrency as well.
Guaranteeing an outsized return is the oldest trick in the con artist’s playbook. Whether the scam is an old-fashioned Ponzi scheme or a brand new cryptocurrency scam, the come-on is always the same - just put your money down and watch it grow exponentially.
The truth is no one can guarantee a high rate of return or even a profit. While some ICOs do rack up enormous benefits, others fail in spectacular fashion. Beware of any ICO that offers guaranteed profits or promises an unrealistically high rate of return.
Vagueness is another big red flag when it comes to initial coin offerings. If the company behind the ICO offers vague promises and unclear responses when answering fundamental questions, you should proceed with extreme caution.
You have a right to honest responses to all your questions, from the most basic to the most technically sophisticated. If the company behind the ICO fails to respond promptly or does not respond at all, keep your money in your pocket and look for a better opportunity.
Everyone wants to get in on the ground floor and discover the next big thing. Most people wish they had bought Amazon.com at its IPO or recognized the value of Microsoft when Windows 3.1 first came out. Unfortunately, no one can turn back the clock or go back to those earlier days. For now, all investors can do is look for the next big thing, and that means not only finding the best ICO but avoiding the scams as well.