The statistics could no longer be ignored. Most ICOs tank and stay tanked once the tokens hit crypto exchanges after the frenzy and ‘FOMO’ participating in the crowdsale is over.
Most observers following the ICO phenomenon generally agree that the trend over the past few months has been for ICOs to fall in value post-crowdsale, with many buyers waiting in vain for the promised “moon” once the Cryptocurrency reaches an exchange portal.
What is not discussed, however, is the main reason why we observe this phenomenon, and what the participants in a crowd sale, including the rating agencies that most of us rely on to make a choice, must be doing wrong when they pick which ICO has the most value, or has the best chance of increasing in value once the crowdsale is over.
While there are many reasons one could legitimately put forward for this phenomenon, there is one fact that I believe is probably more responsible than most of the other contentious reasons: ICO token valuation and the misplaced emphasis on “blockchain Experts”, “ICO Advisors”. ‘ or ‘technical geniuses’ for erc20 tokens.
I have always thought that the need for blockchain technical experts or technical advisors for ICO is overkill or even completely misplaced when judging a project by these criteria, unless the project is actually trying to create a brand new coin concept . With most ERC20 tokens and copycat coins, the really important consideration should be the business plan behind the token and the management history and leadership profiles of the team leaders.
As anyone working in the industry should know, creating an ERC20 token from Ethereum or similar tokens from other cryptocurrencies does not require great technical skills or an overrated blockchain consultant (in fact, with new software out there an ERC20 token can can be created by a total tech novice in less than 10 minutes.
So technically it shouldn’t even be a big deal for tokens anymore). The key should be the business plan; level of business experience; Competence of the project managers and the business marketing strategy of the main company raising the funds.
Honestly, as a lawyer and corporate consultant with over 30 years of experience at multiple companies worldwide, I cannot understand why people keep looking for a Russian, Korean or Chinese “crypto whiz” or “crypto advisor” to show the strength of an ICO to determine for what is basically a crowdfunding campaign for a BUSINESS CONCEPT…
I strongly believe this is one of the main reasons why most ICOs never live up to their pre-launch hype. In an era of an abundance of token creation software, platforms and freelancers, disproportionate focus on promoters’ blockchain experience or technical skills is mostly misplaced. It’s like trying to evaluate a company’s likely success based on its employees’ ability to build a good website or app. This train left the station long ago with the rise of technical hands on freelance sites like Guru; Upwork, Freelancer and even Fiverr.
People seemed to get too caught up in the hype and technical credentials of people promoting an ICO, especially ERC20 Ethereum-based tokens, and then wonder why a tech-superior Russian, Chinese, or Korean didn’t do the business after the fundraiser end of the company can deliver.
Even many of our ICO rating firms seemed to attribute a disproportionate number of points to the team member’s crypto experience, the number of crypto advisors, and the ICO success story they have on their team, rather than focusing on the underlying business model be created with the funds raised
Once you understand that over 90% of cryptos and ICOs out there are simply tokens created to raise crowdfunding for an idea and simply not a token for the sake of the token, then people’s focus will shift from the technical point of view the more relevant work of evaluation shifts to the business idea itself and the business plan of the company.
Once we enter this era of evaluating, before deciding whether to buy or invest in a cryptocurrency, we will begin evaluating the future prospects or value of our tokens based on sound business considerations such as:
– Swot analysis of the company and its promoters
– Leadership skills and experience of team leaders
– The solidity of the business idea beyond the creation of a token
– The company’s marketing plan and strategy to sell these ideas
– The ability to supply the underlying products to the market
– The customer base for the products and services to be created by the company
– and basis for forecasting market acceptance
What most people don’t realize is that the potential for their tokens to increase in value after the ICO depends not so much on anything technical as on the good things happening at the company raising the funds and the perceived increase in value of the Company it presents its business plan and provides its business products.
Of course, buying cryptocurrency does not buy shares or the security of a company. We understand that, but similar to stocks, tokens react to good or bad news about a company. The only difference is that with cryptos, the effect is amplified by 100x.
So when a company hits a financial or business milestone, the price of its token goes up on the exchange… and it goes down quickly when nothing good happens. So what the company will do and how it will do it after the ICO should be of paramount importance to anyone who doesn’t want the value of their tokens to plummet and stay down forever.
Sure, most tokens would crash once the tokens hit a crypto exchange post-ICO for those wanting to take profits immediately, but whether it will ever return to the expected multi-digit profits always depends on the criteria you’ve got I already outlined above. After you buy a token, the values of “Crypto Advisors” and “Technical Wizards” go to zero relative to the potential of your tokens.
Following this reality, I think a savvy crypto buyer or investor should focus less on how many crypto consultants a project has or how technically sound the team is (unless the company’s underlining business is technical in nature) and should focus more on the management, marketing and potential customer base of the company raising funds through an ICO.
In other words, give more credit to the business and management side of the ICO than to the jargon that doesn’t help your token in the market once the money has been raised!