Cryptocurrency ICO Market for Investors
Viktor Argonov, an analyst with EXANTE investment company, answers important questions for private investors regarding the rapidly exploding ICO cryptocurrency market.
In your opinion, is the ICO market suitable for retail and private investments now?
Technically investing in an ICO is not difficult. On many cryptocurrency exchanges, ICO tokens are as easy to buy as any cryptocurrencies. But the main problem here is the lack of confidence in the integrity of the projects. Not always funds raised by the ICO method go to stated needs. Authors may abandon a project or even have fraudulent goals in advance. But now the online community is actively looking for ways to deal with this. For example, rating agencies of the type appeared, where you can get acquainted with the opinion of analysts about the prospects of projects.
ICO – (Initial coin offering or initial offer / placement of coins) – a form of attracting investment in new technological projects and startups in the form of emission and sale of new cryptocurrencies to investors. It is also used in the form of an “initial offer of tokens”. This is a fundraising mechanism under which the future cryptocurrency is sold for current, liquid virtual money.
Private investment in cryptocurrencies
Many tokens at the beginning of trading rise in price purely on a market game – no matter how the project progresses. But this is a matter of luck. And methods for generating serious sustainable income with ICOs are still only sought by investors. One of the conditions for a successful investment is the ability to at least approximately evaluate the prospects of projects. Alone or through the mentioned rating agencies. The second condition is diversification. While methods for assessing the success of projects take the first steps, you should not risk all the invested capital in one project, no matter how good it may seem.
It is better to divide them between a large number of projects. And these are only necessary, but not sufficient conditions. ICO can be attributed to venture investment, which is almost always associated with high risks and requires the investor not only knowledge, but also a certain instinct.
ICO cryptocurrency market today
How do you rate today’s peak of ICO topic popularity? What can this lead to?
The popularity of the ICO topic in recent times is easily explainable: the phenomenon has only now gained wide popularity in a positive way. The experience of the Ethereum currency in 2014-2015 inspired many investors, but the collapse of the DAO fund in 2016 hit the ICO’s reputation.
Only now the network community has more or less neutrally weighed the pros and cons of the new phenomenon, giving it a green light. And at the same time speeding up the work to make this market civilized. But in the case of new high-profile failures, the development of ICO investment may again slow down. Another obstacle may be government policy.
For example, in July in the United States, the Securities and Exchange Commission (SEC) equated ICOs with a placement of traditional shares (IPOs). The same rules now apply in Singapore. Now ICO issuers and token exchanges will have to officially register according to the standards of the classic exchange market. This can increase the reliability of investments, but it will inevitably complicate the ICO and deprive this tool of a significant part of its initial advantages over a bureaucratic IPO.
Have you invested in someone else’s ICO? Perhaps we are ready to tell how successful the investments were?
So far, this has been only once, for a symbolic amount. I saw a new project coming out on ICO, and “without looking” I invested for the sake of experiment. So far, this experiment has been successful: tokens have risen in price. But I did not try to develop a serious investment strategy.
Which companies operating in Russia help retail investors invest in ICOs?
An example of a well-known international initiative in this area is ICONOMI, a crypto investment management platform, whose own ICO was held in 2016. One of its slogans is to give investors ‘superprofits that were impossible in the old economy.’
Now the company is already working, its tokens have risen by an order of magnitude since the beginning of the year, and its capitalization has exceeded $ 250 million. But it’s hard to say to what extent this growth is an indicator of the company’s success, and to what extent is the result of a general increase in investor interest in the cryptocurrency market.
As for the Russian managers of ICO investments, I only know the Satoshi Fund, which announced the closure at the end of July 2017. It is also likely that some traders providing asset management services also invest part of the funds in ICOs.