How to Research ICOs? A Step-by-Step Guide for Crypto Investors

During the ICO boom, namely in 2017-2018, they brought their organizers quick profits. As for investors, participation in ICOs for many of them became a memorable lesson – thousands of projects turned out to be scams, vaporware, or rug pulls. As for the second wave of ICOs, which we see now, regulation for them has become stricter. Moreover, launchpads helping crypto projects conduct ICOs require their teams to pass KYC, and the platforms themselves are subject to an independent audit. Of course, this increases the reliability of buying tokens or cryptocurrencies during an ICO, but you still can't do without independent research. Actually, we will explain how to research an ICO below, as well as share a comprehensive checklist for ICO investors.

What Is an ICO and Why Research Matters

Initial Coin Offering or ICO is an event dedicated to raising funds for the further development of a crypto project and consists of the initial sale of its tokens. Unfortunately, the first wave of ICOs was accompanied by numerous scam precedents, when the team disappeared immediately after the soft cap was reached, so now, they are strictly regulated. At the same time, the ICO market still remains high-risk, especially for private investors.

Key Components to Investigate in an ICO

So, how to evaluate an ICO in terms of investment risk? Actually, when you search ICO, you need to analyze the following aspects of the startup:

• Team. Team leaders and their reputations are often the main indicators of the company's reliability. To find it out, look at their LinkedIn profiles – they should indicate experience in the crypto industry or, at a minimum, with tech startups;
• Product and its technical implementation. Next, you have to figure out why the startup needs the specific technology (or is it just for hype?) and understand whether the MVP has already been launched. In particular, an ICO promising a lot of X’s without a ready testnet or a bot without at least one commit is a red flag;
• Whitepaper. You should start the whitepaper analysis with sections describing the distribution of tokens, vesting for the team and investors, and the monetization model. If the most important details are indicated in small print or are not presented at all, do not trust such a company;
• Roadmap. The roadmap will be your key to understanding what stage the company is at and how realistic its plans are. Don't forget to check the confirmation of the stages already passed;
• Tokenomics. Find out how many tokens are created, how they are distributed, whether there is a mint base for emissions, and what part is allocated for marketing. The numbers should be transparent and not excessive.

How to Conduct ICO Due Diligence

To understand how to analyze an ICO as a pro, feel free to follow these steps. They will help you perform an ICO analysis with the same level of accuracy as large investment funds:

1. Choose an ICO due diligence dashboard. Many ICO aggregators collect metrics on the team, code, ownership structure, and legal documents. Although the most popular ones are CoinMarketCap and CoinGecko, we strongly recommend using several dashboards at once, and also consider options like Etherscan, BscScan, or DefiLlama;
2. Check the repository. The crypto business should publish at least 10-20 commits from several participants on GitHub. You should not limit yourself to checking only https://user/repo – be sure to research pull requests and issues as well;
3. Analyze the team's history. Find out what the startup founders have been doing before. Participation in large projects or the presence of exits looks especially reliable. In turn, the lack of a real focus on crypto can become an objective reason for doubt;
4. Research legal compliance. It is something that also requires end-to-end verification, which means you will have to find out if there are jurisdictions, coin IDs, and the information that the team has passed AML/KYC;
5. Consider social signals. Make a sophisticated request to the team related to technical aspects and watch – if the team responds quickly and not with the help of bots, this will become a kind of sign of reliability.

Also, don’t miss these 9 best AI crypto coins.

Best Tools for ICO Research

Now, let's talk in more detail about our best practices for researching ICOs and consider the tools simplifying your ICO search and help you identify risks before you buy crypto project coins:

• CoinMarketCap (the ICO calendar section). CoinMarketCap is one of the most popular aggregators, where you will be able to research well-structured lists of current and upcoming public coin offerings. Here, you can filter ICOs by date, issue volume, token type, platform (Ethereum, BNB Chain, etc.), etc. Also, you will find links to the whitepaper, crypto project website, smart contract code, and communication channels;
• ICO Drops, ICOBench, CoinCodex, and ICODaily. In a nutshell, these are platforms where you can find independent ICO research reports made by analysts and crypto enthusiasts. They evaluate the project based on the team, idea, marketing strategy, product readiness, and tokenomics;
• Certik, Hacken, and SlowMist. These ICO rating websites allow you to check whether the project has undergone an independent smart contract audit. The presence of an audit does not guarantee its absolute reliability, but its absence is definitely a risk;
• CryptoRank, TokenUnlocks, and Dune Analytics. These are trackers for ICO performance analysis that will help you find out the project ROI, token unlock dates, user activity metrics, and the dynamics of the project's capitalization;
• GitHub. This is another indispensable ICO research tool – here, you can evaluate the activity of commits, the number of contributors, and the frequency of repository updates.

Red Flags and How to Avoid ICO Scams

Since the history of ICO is rich in examples of fraud, there are some unspoken signs worth paying attention to when performing your own research:

• Too attractive promises. If a crypto startup guarantees x10 growth in the first months with a fixed income or claims a technological revolution without proof in the form of real use cases, this is a marketing trap;
• No team or its anonymity. A reliable business always indicates the full names, links to LinkedIn, and previous experience of at least the main team members. If you cannot find confirmation that one of the participants is a real specialist in blockchain or finance, most likely the whole team is fake;
• Fake partnerships. Very often, the project website posts logos of famous brands, allegedly with which the project collaborates. However, before trusting this, you must research whether there was an official announcement from the other side, as well as joint press releases and posts about grants/investments;
• Too watery whitepaper. Many scam projects copy other teams’ whitepapers or create dummies without going into technical details. In particular, the lack of an architectural structure, a business model, and a roadmap looks extremely unreliable;
• No activity in the code and social networks. Inactive GitHub, Telegram with a few messages, and an empty Twitter with retweets only indicate that the company is either dead or simply not attractive to investors.

For additional confidence, we recommend using the best tools for ICO research, such as Token Sniffer and RugDoc – they detect anomalies in the contract, indicating the risk of rug pull.

Tracking ICO Success & Post-Investment Research

After the ICO is over, it makes sense to continue your ICO data analysis to minimize risks and increase your capital with maximum returns. Here are the main parameters for monitoring:

• Strict adherence to the roadmap. Use official announcements, Discord channels, and Twitter to research whether the team has launched its product, released updates, formed new partnerships, and fulfilled the announced stages;
• Active tokenomics. Through the TokenUnlocks.app or VestingCheck for ICO crypto review due diligence, you can check whether the token unlocking has started;
• Token price after the release. Use the CryptoRank ICO search engine to compare the ICO price and the current market price of the crypto coin – this allows you to understand how much expectations were met. A good project is not necessarily one whose coin has grown many times at once, but one that is resistant to volatility;
• Token circulation. Use Dune Analytics, DeFiLlama, Etherscan, or any other tool for ICO US research to assess the number of transactions, active wallets, as well as staking and liquidity volumes – all these metrics should grow gradually.

Final Checklist Before Investing

“What to look for in an ICO?” is the question you should start with when searching any ICO token. Below, we will present to your attention the final checklist to research an ICO – we use it when deciding whether to invest or not:

• Whitepaper and roadmap – they explain the project development strategy and allow you to assess the viability of its business model;
• Tokenomics – it determines how tokens are distributed, whether there is vesting, what the maximum emission is, and whether burning or inflation mechanisms are provided;
• Team and advisors - by their names, you can confirm or deny experience and openness;
• Codebase - it is important to evaluate the activity in GitHub and the presence of a confirmed audit for smart contracts;
• Social presence - the team should regularly communicate with community members and hold AMA sessions;
• Legal transparency - you need to research the data about the token issuer and find out whether the company is registered;
• Transparent marketing and partnerships – find out if the project has real collaborations and a clear marketing strategy;
• Availability of a demo version - this could be an MVP or alpha/beta version;
• Status of the platforms where the token will be listed - they should be reliable and conduct their own audit of the project.