By Josiah Wilmoth
The growing crypto finance industry provides investors with a myriad of opportunities, including initial coin offerings (ICOs). However, many investors are hesitant to invest in ICOs because they are unsure of the risks of this nascent funding model. Strategic Coin wants investors to be able to navigate the crypto finance ecosystem with confidence, which is why they provide the educational materials and in-depth ICO research reports investors need to take advantage of market opportunities as they arise.
Below, this article explains the four types of risk ICO investors face:
Because the U.S. Securities and Exchange Commission (SEC) has not yet issued a definitive ruling on ICO tokens and investments, there is much debate about which token sales are subject to securities regulations and how these rules might impact startups the SEC later finds to be noncompliant. Consequently, the safest investment route to take is to only invest in startups that conduct their ICOs in coordination with legal firms and restrict their token sales to accredited investors.
Investors must also recognize that although ICOs provide startups with the opportunity to raise the capital they need to launch their projects, the majority of startups will still most likely fail. The key to mitigating this risk is to consult in-depth ICO research reports–such as those published by Strategic Coin–before making an investment decision.
ICOs remain highly-speculative, so investors must be prepared to face volatility and potential loss. An ICO whitepaper may state an impressive return target, but this is a goal–not a certainty. Once again, investors can mitigate financial risks by consulting in-depth ICO research reports and only investing in startups with an experienced team and a cogent business model.
Cyber Attacks & Fraud
Finally, investors must remain vigilant to avoid falling prey to cyber attacks. Because crypto finance is a burgeoning field without clear regulatory guidelines or best practices, cybercriminals attempt to find opportunities to steal funds from investors. A recent report by crypto analytics firm Chainalysis estimated that 10% of all ICO-marked funds end up in the hands of cybercriminals.
The most common attacks are phishing scams, whereby attackers impersonate another individual–such as the founder of an ICO–and deceive them into revealing personal information or sending the attacker their funds. Because many attackers operate from outside U.S. jurisdiction and have access to tools to conceal their identities, the SEC has warned that ICO investors may have limited ability to recover their funds in the event of fraud or theft.
Strategic Coin is your go-to source for cryptocurrency investment research and education. Whether you need help understanding the basics of blockchain technology or desire to read an in-depth analysis of the latest initial coin offering, Strategic Coin will provide you with the information and resources you need to understand the crypto finance industry.