I invested a small amount of money in an Initial Coin Offering (ICO). The top was 5 dollars in 2021, and now it’s worth 5 cents.
Crypto was in a bull market. Everyone was positive. The sky was the limit.
This new coin was something that would change the market. Everybody was hyped.
Did you ever have the same experience? Have you ever felt the FOMO for an ICO?
I’ve learned from this mistake. One time and never again. 99% of the ICO goes up very fast and dumps for months. My take on this: buying a new coin takes patience and the right timing.
I waited five months and bought more of the same coin. I did this based on respected levels on the chart and RSI divergence. Eventually, this gave me a massive 10x gain.
Time is your friend
The simplest advice when trading is to buy low and sell high. This is what we are all trying to do, right? Many people buy high and sell low when it comes down to ICO. They FOMO’ed into the coin, regretted their investment, and bailed with a massive loss.
Let’s take a look at the different ways people lose money with an ICO:
- ICO is dead or fake
- Rug pull or exit scam
- Copy-paste scam
- Pump and dump
- Ponzi scheme
- Phishing traps
The best solution for all the problems is to stop investing at a launch of an ICO. Not all projects are bad, but even the good ones don’t go up forever. Waiting before you invest in a new coin can save you a lot of pain. We want to win the crypto game and not lose our money trying.
There is one exception: you have an invite to the pre-sale of an ICO. After being listed, a coin will be offered for a fraction of the price. People in the pre-sale normally dump the coin on the open market after launch. Most people don’t get invited, and they need to buy the coin on the open market.
Here are my three tips that can help you gain wealth investing in an ICO:
1. Make a list of the ICO and keep track of their progress
My first advice is to list projects you are interested in. I recommend using a spreadsheet. The goal is to have an overview of how good a project is. Based on your rank system, you make an investment. For example, you can rate a project on its:
- Whitepaper
- Development team
- Major investors
- Roadmap
There are many more aspects you can rate a project. Choose what suits you the best.
The spreadsheet gives you a larger perspective. This will help you reduce emotions when investing in an ICO. Also, remember to take social media recommendations with a grain of salt. Your research weighs heavier than other people’s opinions.
2. Do (simple) technical analysis
A great way to improve your insights into an ICO is by doing a technical analysis (TA). People use it to predict the price. The goal of doing a TA is not getting a perfect entry. The goal is to figure out when it is a good moment to start dollar cost averaging (DCA).
These are the most important indications:
- Market sentiment, bull or bull or sideways market
- What are the major support levels on the daily and weekly time frame?
- Is the coin overbought or oversold on the RSI indicator?
For example, in a bear market, you can start buying a coin when the RSI is oversold on a daily or weekly time frame, and the price hits major support levels. A major support level is a level that is respected on the chart on a higher time frame (daily, weekly, monthly).
I will not go too deep into the TA, but the key take is that you know a bit about TA, and you DCA the coin when it’s oversold.
3. Start small
When you start DCA, you need to start small. So use a small percentage of your overall DCA amount to invest in the ICO. For example, if you invest monthly $100, then you could invest 1 to 5 dollars into an ICO. Over time this will build up.
If a project fails, you only lose a small piece of your portfolio. And if you invest in multiple ICO’s, you spread the risk. Most ICO’s will fail, but some will give you massive gains. This will compensate for the failed ones.
My initial approach to an ICO was way too risky. Without a plan, you can lose a lot of money. One bear market can throw away years of wins.
My lesson for investing in an ICO:
Have a plan, do your research, DCA, invest small and spread your investments in multiple ICO.
Stay safe, and best of luck.
Daniel Donselaar
