Altcoins tends to loose market value immediately after ICOs. A study of the top 25 altcoins with the highest market caps indicates that you should wait 1-3 months before investing.
It seems that ICOs are popping up left and right at the moment. So I asked myself, is it something I should invest in, and do I need to move fast?
I had a bad case of the good old FOMO (fear of missing out), and that is not good at all because I need to keep my head cool if I am to succeed as an investor. So I checked out some whitepapers and watched some YouTube videos and decided that I couldn’t come up with a definitive answer.
That's why I decided to do this study. And now I’m sharing my results with you guys in the hope it can help you along the way to financial success. I think however that we should start from the top by explaining what an ICO is.
What is an ICO?
For those of you who don’t know what an ICO is, here is a short definition. An ICO is an Initial Coin offering by which Blockchain companies raise startup capital for further technological development of their cryptocurrency. Investors pay the company X amount of money in exchange for newly created cryptocurrency and the ICO ends either when enough money is raised or when a set time limit is reached.
The companies who launch ICOs tend to publish a white paper wherein the purpose and plan for the cryptocurrency is explained. I will put links below to some of the cryptocurrencies with the highest market cap. I think you should at least read Satoshi Nakamoto’s white paper on Bitcoin. It will give you a basic understanding of why cryptocurrency was invented in the first place and what Nakamoto thought Bitcoin should be used for.
The cryptocurrency market is worth more than 100 billion US Dollars
The cryptocurrency market is at an all-time high with a market cap of more than a 100 billion US Dollars.
Source: https://coinmarketcap.com
Likewise, the amount of money raised on ICOs are higher than ever although the actual number of ICOs is declining. This means we are seeing fewer ICOs but they raise more capital than before. For instance, Gnosis just raised 300 million US Dollar in 2017, while Ethereum, which is the blockchain Gnosis runs on, raised a meager 18 million US Dollars in 2014.
Source: https://www.smithandcrown.com
An analysis of the top 25 altcoins
While the cryptocurrency market is at an all-time high, this doesn’t mean that you should sell everything you own an put it into an ICO. I have analyzed the top 25 altcoins according to market cap and the results are pretty clear. But let’s take a look at the charts first. I have chosen only to show the first six months of price movement, this means that my study doesn't show the curent status and the altcoins true evaluation. However this will be enough to prove my point regardless. If you don't like charts I suggest you skip them and just read the conclusion.
NB: The following top 25 altcoins are not included, either because of lack of info or because they didn’t have an ICO: Ripple, Litecoin, Bytecoin, Golem, Sia, GameCredits and Bitshares.
Conclusion
There is a couple of good reasons to buy early. Sometimes early investors get a discount or certain privileges before the ICO. If this is something that suits your temperament, then I think you should go for it. It’s also worth to mention that by joining early you help finance the development of new techs which in the end could help benefit all of humanity. If that’s the case by all means should you invest early and hold on to your coins for the long run.
But if you want to make a nifty profit, you should always go for the ROI (highest return on investment). Most ICOs see either high upwards volatility followed by a steep dip in price or just a dip within the first 3 months. This could indicate that initial investors tend to take home their profit immediately and simply dump their altcoins on the market. This would not be the time to enter the market if you seek short-term gains. It would simply be too risky. It would be much better to wait 1-3 months after the ICO and then buy at a bargain price. In most cases, the top 25 ICOs have all begun to rise after this 3-month period.
List of ongoing and starting ICOs: https://www.ico-list.com/
ICO definition: http://www.investopedia.com/terms/i/initial-coin-offering-ico.asp
Bitcoin white paper: https://bitcoin.org/bitcoin.pdf
Steemit white paper: https://steem.io/SteemWhitePaper.pdf
Ethereum white paper: https://www.google.dk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0ahUKEwjEnpLWyq7UAhWiPZoKHemHD9sQFgguMAA&url=http%3A%2F%2Fwww.the-blockchain.com%2Fdocs%2FEthereum_white_paper-a_next_generation_smart_contract_and_decentralized_application_platform-vitalik-buterin.pdf&usg=AFQjCNFqqwRblfP6VPWxpdubUqeuPihiCg&sig2=ZCze-2ytJU0nJejZt9sf3g&cad=rja
Thank you for reading. I hope you can use the info for your own investment strategies.
Your comments are much appreciated and feel free to ask any questions
Such a useful post. Bookmarked and shared on twitter. Really appreciate this info Dan.
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I had suspicions on the drop of price. But seeing is believing. Tell me, do you have any thoughts on the upcoming eos ico. Lots of FOMO and excitement concerning it's release.
I'm glad you liked it @jacobts, and thank you very much for sharing on twitter. Much appreciated!
About the ICO: They will distribute the tokens over one year. I think it's the first time this ICO model is tried out, so the data from my study will be somewhat insufficient in comparison to this ICO. However there might still be some parallels since the history clearly shows that it is generally better to wait it out.
In regards to EOS I think the early investors will likely be paying a much higher price than those who jump aboard later. I will be waiting 6-18 months to see how it plays out and then buy if the price looks right and it has seen successful DAPPs developed to the platform.
Cool post :-) really interresting
Thanks @cashisking :)
Hi,i found you on friendtrain and am now following and upvoting you -David
Hi @daydreams4rock.
Thank you and I followed back :)
Thanks for this!
Following you :)
I'm glad you liked it @judym.
I followed you too ;)
Great analysis. Makes me feel better about missing out on the most recently hyped ICOs. I am sitting out of Tezos for sure.
This post received a 31% upvote from @randowhale thanks to @cryptodan! For more information, click here!
I need to come back to this later today when I have a moment to take it all in. Appreciate you posting this research, been pondering this dynamic. Thanks!
Your welcome @scaredycatguide. I would like to hear your thoughts on it.
Yes... you are right to buy early before ICO, but is it mean that we take the risk because we do not about their perform in the future?
Yes that is a risk on the long, but it's also a even greater risk if one would plan to sell right after the ICO because this tends to be a very volative moment
An elaborated explanation.
Thank you @rocksg
good information of trading
Thanks I'm Glad you liked it :)
Great read. Don't most modern IPOs follow this exact same pattern?
A quick, utterly non-conclusive glance at some of this year's IPOs seem to highlight the same behavior. Mulesoft and Canada Goose all highlight a same mild correction shortly after IPO. This likely aligns with your conclusion that some early investors are just taking money off the table and enjoying their early gains.
Thanks @somethingsubtle.
I think you have made a great point. I have also spend some time looking into IPOs, and I came away with the same conclusion. In that way it was part of the basis for my hypothesis regarding the ICOs. Thanks for your input :)
well done, very good content like always
Thank you @goodaytraders, I'm glad you liked it :)
upvoted and following (:
Thank you @orinklev, good to have you on board :)
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very good article - thank you! i was thinking about buying in at the status ICO this coming monday .. but i think i will just wait until they are on the market .. i observed the same what you described, that "big investors" tend to sell their share shortly after they hit open market .. IOT is the latest example of that, but it went live on a very unfortunate day, ... I was fortunate because i bought cheap :D i don´t know how much the early investors paid though ... not sure about the status ICO, i think it´s a hastle to even get a share, because they are being rushed over ... hmm i´ll meditate about it
Great point about IOT, another thing is that most altcoins are not fully developed techs, so people buy into unfinished products when they jump on the ICO train. This is always a bit of a gamble :)
Meditation often helps us come up with the right answers.
I hope you make the right decision, and thanks for dropping by :)
haha great, yeah the ICO market is crazy right now, time to be aware