To choose the right ICOs to invest in seems quite hard, considering the growing number of tokensales that arise every day. Surely, the team of a project plays an important role in the future success of it – though there are some methods which might create a wrong impression for you.
An advisory board that consists of well-known celebrities, successful entrepreneurs or experts – A sign, that usually creates the impression that the team of the ICO carefully and wisely selected people as advisors that could be a help in the future.
When I am conducting an ICO analysis, I usually consider the team as a major factor. But the previous movements in the market made me think much more skeptical about the team of ICOs.
Some ICOs “enhance” their marketing in regards of their team or advisory board by providing special discounts to celebrities that afterwards serve for marketing purposes or reviews of the project. This theory is spread more and more by many experts in the field of ICOs. And real cases already occurred, that proved the – in my opinion – unfair discounts abused for marketing purposes:
In October 2017, the Financial Times wrote about the Cobinhood ICO, stating that the chief of this ICO apologized for his practices concerning hidden pre-sale discounts for specific people. According to Financial Times, Ian Balina was provided a bonus of 150% for the purchase of tokens. Balina, with 14,000 Twitter followers, is offering paid information about ICOs. It can be doubted if with this deals the published ICO information are still objective.
Which ICOs are using special discounts for celebrities in Presales?
Unfortunately, it is very hard to detect when an ICO is using the described strategy to manipulate possible future investors by showing off with people connected to the project that have an influential role. Since the nature of ICOs nowadays allows for more or less anonymous transactions (tokens can easily be transferred on the Blockchain without requiring the receiver to be identifiable), it is quite complicated to find out about these deals.
In my opinion, it is more likely that these strategy is used for people of the advisory board, rather than for team members itself. Sometimes, the way of advertising the project as an advisor is very aggressive. In these cases, you should be careful and ask yourself if this person really offers a value by his previous experience to the project. It might be right that he is interested in pushing the token price of the project.
But if people are receiving a 100% bonus compared to the normal price that you pay, they would even earn a lot of money by selling the tokens for a price just a bit below the issuance price. This creates losses for you if you paid the normal issuance price.
These actions performed by ICO teams may be one of the reasons for observing hockey stick diagrams for the token prices of ICOs. In many cases, the price of a token fell rapidly right after the beginning because people provided with huge discounts just sold their tokens to collect a fast profit.
ICO Scam: How scammy is the market?
I would not call ICOs in general a scam because some of them are using unfair methods. Not even the ones that do give special discounts to advisors are necessarily scam. Obviously, advisors and supporters of the project should be rewarded for their effort to push the project forward. A problem arises, if the advisors only serve with their influential role to attract aa huge number of investors with a very short-term view, leaving out the real value creation of the project. If done correctly, advisors can add value to the project by their experience and knowledge – not by catchy tweets.