ICO Token Valuation and the Misplaced Emphasis on Blockchain Technical Experts And ICO Advisors
The statistics could no longer be ignored. Most ICOs tank, and stay tanked, once the tokens get to the crypto exchanges, after the frenzy and ‘FOMO’ attending the crowdsale is over.
Most watchers keeping track of the ICO phenomenon universally agree that the trend in the last few months has been for ICOs to lose value post-crowdsale, with many buyers waiting in vain for the ‘moon’ they were promised, once the cryptocurrency hits an exchange portal.
What is however not being discussed is the principal reason why we are witnessing this phenomenon, and what participants in a crowdsale, including the rating companies most of us rely on to make a choice, must be doing wrong in picking which ICO have most value, or has the best probability of rising in value once the crowdsale is over.
While there are a lot of reasons one could legitimately proffer for the phenomenon, there is one fact that I think is probably more responsible for this than most other contending reasons: ICO token valuation and the misplaced emphasis on ‘blockchain experts’, ‘ICO advisors’ or ‘technical whizkids’ for erc20 tokens.
I have always thought the need for blockchain technical experts or ICO technical advisors is exaggerated, or even outrightly misplaced, when a project is judged by that criteria, unless the project is actually trying to create a brand new coin concept. For most ERC20 Tokens and copycat coins, the real important consideration should be the Business Plan behind the token and the managerial antecedents and executive profiles of the Team leaders.
As anyone involved in the industry should know, creating an ERC20 token from Ethereum, or similar tokens from other cryptocurrencies, does not take any great technical skill or require any overrated blockchain advisor (as a matter of fact, with new software out there, an ERC20 Token can be done in less than 10minutes by a complete technical newbie.
So technical should no longer even be a big deal for tokens anymore). The key should be the business plan; level of business experience; competence of the project leaders and the business marketing strategy of the main company raising the funds.
Frankly, as an Attorney and Business Consultant of over 30 years myself to several companies globally, I cannot I cannot understand why people keeping looking for some Russian or Korean or Chinese ‘Crypto Whiz’ or ‘Crypto Advisor’ to determine the strength of an ICO for what is basically a crowdfunding campaign for a BUSINESS CONCEPT…
I am of the strong opinion that is one of the major reasons why most ICOs never live up to their prelaunch hype. In an era where there is an abundance of token creation software, platforms and freelancer, the disproportionate focus on the blockchain experience or technical ability of the promoters is mostly misplaced. It’s like trying to value the probable success of a company based on the ability of its staff to create a good website or app. That train left the station long ago with the proliferation of technical hands on freelancing sites like Guru; Upwork, freelancer and even Fiverr.
People seemed too caught up in the hype and the technical qualifications of people promoting an ICO, particularly ERC20 Ethereum based tokens and then wonder why a technically superior Russian, Chinese or Korean guy cannot deliver the business end of the company after the fundraising campaign.
Even a lot of our ICO Rating companies seemed to allocate a disproportionate number of points to crypto experience of team member, how many crypto advisors they have, and the ICO success experience they have on their team, rather than focusing on the underlying business model to be created with the funds raised
Once one understands that over 90% of the cryptos and ICOs out there are simply tokens created to raise crowdfunds for an idea, and just not a token for token’s sake, then peoples emphasis will shift from technical angles, to the more relevant work of evaluating the business idea itself, and corporate business plan.
Once we move into this era of evaluation before deciding whether to buy or invest in a cryptocurrency, then we will start valuing future prospects or value of our tokens based on sound business considerations such as:
– Swot Analysis of the company and its promoters
– Managerial competence and experience of the team leaders
– The soundness of business idea beyond the creation of a token
– The marketing plan and strategy of the company to sell those ideas
– The ability to deliver the underlying products to the marketplace
– The customer base for the products and services to be created by the company
– and basis for projecting adoption in the market place
What most people failed to realize is that the potential for their tokens to rise in value post ICO is not so much dependent on anything technical but on the good things happening in the company raising the funds and the perceived increase in the valuation of the company as it rolls out its business plan and delivers on its business products.
Of course, buying cryptocurrency is not buying stock, and it’s not buying the security in any company. We get that, but tokens react much the same way as stocks react to good news or bad news about a company. The only difference is that in the case of cryptos, the effect is magnified a 100 fold.
So, when a company meets some financial or business milestone, the price of its token on the exchange will go up… and it goes down fast when nothing good is happening. So, what the company will do and how it will do it after the ICO should of the utmost importance to anyone who does not want to see the value of his Tokens plummet and stay down forever.
Sure, tokens most tokens would plummet once the tokens hit a crypto exchange after the ICO, because of those who want to take immediate profits, but whether it would ever come back up to give you the expected multiple digit profits will always depend on the criteria I already outlined above. After you have purchased a token, the value of the ‘crypto advisor’s and ‘technical whizkids’ go to zero in relation to the potential of your tokens to moon.
Following this reality, I think a smart crypto buyer or investor should focus less on how many crypto advisors a project has or how technically sound the team is (unless the underlining business of the company is technical in nature) and focus more on the managerial, marketing and potential customer base of the company raising funds through an ICO.
In other words, allocate more points on the business and management side of the ICO rather than the technical jargons which won’t help your token in the marketplace when the money has been raised!