Identifying a Cryptocurrency Scam: Smart ICO Investing

Bitcoin is no longer a dominant cryptocurrency. The cryptocurrency’s dominance is at its lowest level currently at less than 37% against 80% a year ago. [1]New and better cryptocurrencies are coming up every day via Initial Coin Offers (ICOs) which resemble Initial Public Offers for stocks. There are over 1,500 cryptocurrencies currently.

Although Bitcoin was the first cryptocurrency, newer cryptocurrencies have proved to be better in many aspects. In fact, most cryptocurrencies which have eroded Bitcoin’s market share have done so because of solving fundamental problems affecting Bitcoin. The coins have also explored widespread applications of Blockchain technology, the underlying technology behind cryptocurrencies.

The growth of cryptocurrencies can also be linked to the massive profits earned by early adopters. There is a huge appetite for new cryptocurrency offers currently as people look to find the next Bitcoin. This demand has attracted many scammers into the space.

After all, people have proven to be willing to throw money towards highly speculative cryptocurrencies indicating that they may be willing to invest in fraudulent ICOs. If you don’t want to miss out on an opportunity of a lifetime, but you aren’t willing to be scammed, here are some notable tips to consider when you want to identify an ICO scam.

Investigate the team behind the offer

page1image3747184Never buy into any ICO before you investigate the team behind the offer. Focus on the developers as well as the administrative team and keep off ICOs which don’t involve renowned individuals whose background and expertise is verifiable. Many ICO scams feature non-existent founders and project biographies. If you can’t find adequate and verifiable information about the individuals in question on official websites, LinkedIn among other social media sites, don’t invest. The developer and administrative team must be composed of real reputable people. Their capabilities should also measure up to the project otherwise the ICO may be unsuccessful even if it is legitimate.

Read the whitepaper thoroughly

The white paper is the most important document in any ICO. A whitepaper resembles a prospectus. It lets you know the background, strategy, goals, timelines as well as the concerns for implementing a blockchain-related project. A whitepaper will help you gauge if a sound concept backs the offer. You should look out for whitepaper “red flags” such as spelling mistakes, poor concepts and implementation plans, poor sources, etc. Avoid such ICOs as well as those that present legal concerns and lack financial models. You shouldn’t think twice about ICOs without whitepapers.

What’s more: A convincing whitepaper can still be presented by a fraudulent company. PlexCoin is a great example. PlexCoin ICO raised $15+ million but ended up being fraudulent. [2]

Check the token sale

All ICOs depend on token or currency systems to facilitate a crowdfunding process. Legitimate ICOs are characterised by open token sales that are easily accessible to potential investors. You should check the ongoing token sale figures continuously. If the company behind the ICO is making it hard to monitor the progress of the token sale, this is a red flag. Many ICO scams purpose on creating fake urgency. So, avoid ICOs where you can’t verify token sale progress with ease.


Assess the feasibility of the ICO

Considering there are more than 1500 cryptocurrencies currently, you should focus on offers which have the potential to “beat” their competition. This may appear obvious, but many new cryptocurrency investors fall for coins which are mere duplications of existing coins. Such coins are identical in every way to existing coins with their key focus being raising the initial investment money. The person’s behind such coins have no intention of creating anything of value after the launch.

Although cryptocurrencies have shown massive potential, i.e., you can get rich overnight after making a minimal investment, they tend to be affected by speculation. The most successful offers have been slammed in the past. You should, therefore, focus on investing in ICOs which offer solid opportunities instead of investing for speculative reasons. Spend a lot of time assessing every detail and treat any omissions in the offer as attempts to hide poor models or concepts. If you do the groundwork, cryptocurrencies can offer you passive income enough to avoid overdependence on short term loans like payday loans. You can also get rich in the process.


Is the Company Director of Swift Money Limited.
He oversees all day to day operations of the company and actively participates in providing information regarding the payday/short term loan industry.

Leave a Reply

Your email address will not be published. Required fields are marked *