How to Avoid Mistakes Investing in IEOs

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Bittrex has tried to turn things around after some inelegant first steps into IEOs. The crypto exchange’s first attempt at an IEO aborted when RAID (XRD) made some last minute changes in partnerships. Then Bittrex tried an IEO for Ocean Protocol (OCN), and enjoyed a successful launch, but tokens lost 80 percent of their value following the sale.

Finally, Bittrex struck a note with Standard Tokenization Protocol (STP), which raised $750,000 in an eight second sale. But their rough start to the IEO game is a timely reminder that prudence is paramount to successful IEO investing. It’s impossible to be certain which sales are going to flop, but there are a few key ways investors can protect themselves to make smarter investments. 

Look for red flags in the online community.

Just today, Resistance announced that its primary IEO would be held on its own platform, a blow to their community members that were led to believe the IEO could be happening on a major exchange. But red flags came last month for attuned investors. Interested parties should be plugged into the crypto community and tenured community members working on projects are often the best primary sources for what’s going on inside development. If several of a project’s advisors — including respected firms like MB Technology and 100X Advisors — are let go simultaneously, as was the case with Resistance recently, and the community has brought up issues around mismanagement of funds, this should raise some alarms. 

Keep a close read on what’s happening through Telegram and other niche crypto communities. It’s one of the best ways to stay in the loop.

Examine the health and strength of the partnerships.

When RAID flopped on Bittrex, it was the result of a last minute change in partnerships.

“We decided to cancel the IEO as a result of significant changes in the business status of RAID,” said a statement by Bittrex. “Specifically, a few hours ago, OP.GG terminated its strategic partnership with RAID, which was a vital part of the RAID project. When Bittrex International became aware of this significant event, we did not feel that it was in the best interest of our customers to move forward with the IEO.”

Strong, healthy relationships with credible partners are the bedrock of a successful company. If there’s a fracture, especially a last minute one, it might be time to pull up stakes.

Play the long game, and don’t spook if your IEO is shaky.

Smart investors are looking for an IEO that’s going to have lasting value based on a strong company model and high demand, not just a flash in the pan launch. In the case of Ocean Protocol, investors spooked and this affected prices right on the heels of the launch. This clues us in that many of them were looking for a quick buck instead of measuring the longevity of the company. Crypto may be revolutionary, but at the end of the day, a crypto company is like any other company. It needs a good business model that fills a need. Do your research so you can be confident in your investment.

Played intelligently, IEOs are a great way to make money and support the future of commerce. But it’s not a game that rewards everybody just for jumping in the ring. Make sure that you’re positioned to access good intelligence, through primary community channels like Telegram. This will keep you on the pulse. What are insiders saying? Are there red flags? Look carefully at the partnerships behind each company. Are they healthy and strong? Can they support the company’s long term operations, in addition to their fundraising goals? This will give you a picture of the long term, and help you make smart decisions about whether this is where your money should be.

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