Flipping ICOs – how to measure the risk?

Flipping an ICO is a trade where you subscribe to the initial coin offering with the intent of selling out of your position soon after the coin hits the public markets. Just how risky is investing in the average ICO though?

Let’s start with the base case of not being able to pick a hot ICO from a dud. Our initial ICO flipping strategy would therefore be to participate in every ICO and get out when the coin or token starts publicly trading. But to be able to get out, we need liquidity. Liquidity for ICOs listed on tokenmarket since the start of June is shown below:

ICO liquidit

Of the 30 or so ICOs in June almost half of them are completely illiquid and from a trading perspective this money has just gone up in smoke. You would need an average return of 100% on the remaining ICOs just to break even. Participation in every ICO is therefore a terrible strategy!

The first step to profiting from ICOs is therefore to find a systematic ICO selection strategy that works. We’ll cover potential ICO selection strategies in a future post.

 

 

One thought on “Flipping ICOs – how to measure the risk?

  1. Pingback: ICO basic strategy design | Know Your Alpha

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