How to invest in Blockchain: a survival guide by Kepler Finance
Intro: an overcrowded market and a bunch of buzzwords
The Blockchain ecosystem lives in trends and buzzwords: 1k-x growth, volatility, ICO, disrupting x-industry, HODLing, transparency, scalability – you name it.
Now, if you've been in the crypto-space for a while, the odds are that you started to follow and sometimes invest in a few projects that convinced you. Say it was the team, or the idea, or the ICO ROI potential – whatever it was, at a certain point you decided to put your time and, again, your money into them. But after the buzz, the brand new token/project you added to your portfolio stopped making the news.
You have seen multiple “world-changing projects” raise and fall before, and many tokens left unlisted, or without any real use.
The latest study by EY found that a lack of fundamental valuation and due diligence by potential investors was leading to extreme volatility in ICO performance.
There needs to be a shift in investor behavior — the all-important due diligence and risk assessment needs to take front and center of your ICO investment strategy.
The most promising ICOs: the Chimera of the crypto-space
So, how do you track and evaluate a project/token in crypto?
First of all, when it comes to an ICO Story - as they say, it's never about getting the right answers, rather it is about asking the right questions. What are the right questions then? And how do you evaluate the answers that you get? To escape from the momentum of trends and buzzwords, let's consider a few, reasonable criteria which may help you find the best ICO to start investing in blockchain Technology:
- 1. Value proposal: Problem and Solution
- 2. Industry: Market, current state-of-art and real-world use-cases
- 3. Technology: innovation, Git activity and stage of development
- 4. Team & Advisors: their history and their actual involvement in the project
- 5. Social Activity & Marketing: Team communication and Community engagement
- 6. ICO Documentation: analysis, technical details, white paper
- 7. Legal status: incorporation, headquarter and documentation
Some of the data can be found on the project’s website. The rest gets cloudy, especially when it comes to industry insights.
Till now, at best, you could find pieces of unvalidated information scattered across various channels – and you even had to be lucky in order to find them. Not only there was no one-stop resource to find all the data you needed, but that meant, for investors, that they were forced to spend hours (if not days) searching for these data just in order to choose what blockchain companies to invest in, and make sure their money wouldn’t get flushed down the pan.
Now there is one single resource which saves you time and money instead of wandering around the web hunting for key-data. Kepler Finance, in fact, aggregates key data about active blockchain companies, funding rounds and teams across multiple sources, so that anyone researching the blockchain space can find it easily. The good news is that this tool is not only priceless – but completely free. Nevertheless, before digging into Kepler Finance, let's continue with our analysis.
ICO Investment: evaluation
Now that we clearly identified the key-data and the right set of metrics to evaluate an ICO, let's dig deeper into them, to see what needs to be investigated in order to orientate in the ICO investment landscape before investing a penny into a token.
1. Value proposal: innovation doesn't need to sound cool, it needs to be new.
A real project doesn't need to reinvent the wheel – it needs to make it run faster, or to make it more resistant, or smoother. One determinant factor to consider in evaluating whether to invest or not to invest into an ICO, is the pertinence of the solution. It's important to check if a Blockchain startup is selling fresh air, or it’s hard-working to solve a real problem faced by real people.
2. Industry: Market, current state-of-art and real-world use-cases
Again, Blockchain technology is not a catchword: it solves actual problems, but it doesn't solve everything. To establish if it’s an actual solution requires metrics and analysis, such as the amount of capital available in the market, who the competitors are (Competitive Landscape), if they are doing exactly the same thing, if they received funds before, if the industry performed better or worse in respect to previous years (Market Analysis). Industry data are diverse and sometimes complex, but they are the most widely available, and they should be consulted before taking action and risking your own wallet.
3. Technology: a Blockchain company should make use of Blockchain technology.
Ok, this one seems trivial – but, is it? Keep in mind that ICOs, especially till a few months ago, have been for Blockchain startups and global blockchain technologies an extraordinarily quick, simple, unregulated way to profit: in a few days, sometimes in a few hours, you could switch from being broke, dreaming to be Steve Jobs in your great-aunt’s garage – to being uncertain on what model of Ferrari add to your collection. This helped many valuable projects to see light, as well as for the ICO eco-system to attract scams and frauds. Always analyse what the company is actually offering in exchange for their coins/tokens. Check if the team updates their Git activities, if they actually need blockchain technology, if their token has actual use on the platform, if it fosters governance, grants special rights, or if the whole ICO-thing is just yet another excuse to speculate on the Blockchain trend.
4. Team & Advisors: the people behind the circle thumbnails of a web-page.
Ever heard of cameo appearances in the cinema? That's what some team members and Blockchain advisors sometimes do in high-profile ICO's. They show up, get paid, and disappear while forgetting about the project. Now, an actual Blockchain startup needs much more than that: it needs (1) a highly specialized team, preferably with experience in the field, and (2) experienced Advisors to fill-up missing links or provide industry/field-specific expertise. In order to do that, each member/advisor circled into a smiling White Paper picture needs to (1) be a real person, (2) have actual history/presence/expertise in the role they occupy, (3) be actually involved/committed to the project. Always aim for balanced teams with proven experience both in the business-specific industry and with the technology they claim to use.
5. Social Activity & Marketing: a great team/technology needs a community to succeed.
Not only a great team and a great technology decide the success of a project – in fact, the most critical factor is the adoption of the product and the use of the token. Always consider the activity the Founding members are having on their socials, and how the Marketing team is spreading the project mission. Are they consistent? Are they attracting the right customers/users/community? Are they visible enough? An invisible project/token, even with an outstanding team+technology, will be either doomed to fail entirely, or to fail, once it’s already traded, in catalyzing interests from tangent markets.
6. ICO Documentation: if you do something concrete, you will have no reason to hide it.
Again, transparency is key. A Blockchain startup with a solid team and viable technology will have all the interest to show as much information as possible about their innovative solution. They will do so by (1) informing perspective users and investors about the distribution of funds, (2) detailing the roadmap for the release of their final product and (3) providing an actual White paper which clarifies the stack of technology and the R&D applied in the project. If only part, or none, of these are available - forget about it. If the White Paper is too long for you to read, forget about it.
7. Legal status: incorporation, headquarter and documentation.
Now, we know that SEC has been catching up with regulations, and that governments are not always welcoming towards cryptocurrencies – but we should ask ourselves if an unregistered company, or one incorporated and headquartered in some exotic Pacific island is the right solution for that. More often than not, a consistent Blockchain project, especially one entering an ICO, will (1) be clearly incorporated, (2) underline its KYC compliance, and (3) highlight the jurisdictional legislations which allow investors to get in. If they do underline them, always double-check if they are suitable for you. If they do not underline them, run away as fast as you can.
Fundamental analysis tools to analyse, filter and cross-check data
Now, to collect and verify these data may be dramatically time-consuming, having it to surf the web for hours, if not entire days. As we introduced before, though, this is what Kepler Finance is all about. More in details, it is a website for fundamental analysis which helps Blockchain investors to find the necessary information and resources to save time and money.
In fact, Kepler Finance collects all the key-data about a project and aggregates them in a free database which saves you money and hours of research.
Kepler Finance focuses on active companies, so you won’t be mislead with data about the companies that are out of business. It can help you assess the industry overall, competitors and their performance, historical data on funding rounds. It’s also good for verifying current positions of the teams within a company, finding executive team members and advisories. If a company doesn’t have a profile on Kepler Finance - it means that the team hasn’t been active yet and hadn’t raised any previous round of investments. Moreover, the team announced an upcoming feature that will allow investors to search for companies with similar investment target using industry filter and keywords.
As digital currencies are traditionally pegged to volatility, under the financial perspective we live in a mixed-state of uncertainty: we love them for having the potential to race-up all of a sudden, and we hate the feeling of “almost knowing what's going to be next, but never being quite sure.” That being said, in this panorama, as we cannot fully predict the behavior of the market, preparation is not a financial instrument, but rather a way of getting as ready as possible for the next momentum.
So let's now consider a few pro-tips which can help us to get a ratio between passionate gut-investment and long-term ROI, by limiting the risks in such an overpopulated market as the crypto-sphere:
- Always consider the actual use-cases of the project/token when you’re looking for the best ICO to invest in. Don’t evaluate it only as a digital asset, but also for its network of partners, its community and, if possible, even real-world infrastructures.
- Be aware of scams: first of all, check the documentation. If there's no White Paper, compliance policy and at least a prototype: don't waste your time and money.
- Be aware of huge bonuses: x% discounts and bundle sales may be a marketing strategy, or again a facade for an old-fashioned pyramid scheme.
- Never buy get-rich-fast kind of promises: a trustworthy Blockchain team will never promise you huge profits on the ICO stage.
- If you believe in a project, don't invest only money. Support it with your time or your influence. Write about it, mention your personal experience, report bugs: your good attitude may make the difference in creating a better community and a more valuable product.
- The golden-rule: As diversified as you want your portfolio to be, always invest only the amount of funds you can lose, in total.
- Stay up to date. Join an investors community that shares the same principles where you can gain and share insights.
- And remember the tools and criteria for fundamental analysis. No hype or buzzword should ever stand against your personal judgement.
Kepler Finance is currently in beta and absolutely free. Join us on Telegram or check out our website to ask us any questions and stay always up to date!
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