Recently, we have seen many startups turning to fundraising through ICOs. As investors, we might wonder how to assess the value of ICOs. In this article, we will attempt to find answers. The value of various ICOs depends on several factors as follows:

1. Utility of the ICO Tokens

What can investors do with the tokens they purchase? What benefits do they receive? For example, if a token can be used to buy products and services within the company's ecosystem, and those products and services are expected to be in high demand in the future, the value of that token will undoubtedly increase.

2. Research and Development Team

This factor is crucial to the project's success. Without a strong and experienced team in the industry the company is competing in, the project is unlikely to succeed. A good research and development team can create a product that meets market demand and has better features than competitors, leading to rapid growth in sales and revenue, which in turn increases the demand for the tokens.

3. Technology

Is the technology the company is developing expected to be in higher demand in the future? Analyzing this requires knowledge and understanding of technology trends and business dynamics in that sector.

4. Number of Users

Is there a large number of users for the product? This includes both current users and projected growth in the future. If a product has a large user base, the market value of the exchange medium, which is the coin or token, will also increase.

5. Competition

How capable are other companies developing similar products? If there are too many competitors, it may lead to price wars that can reduce the company's profits, increasing the likelihood of project failure.

6. Prototype

Has a prototype of the product or service been developed? Companies that have created prototypes and received positive reviews can enhance their future value.

7. Partnerships

Does the company have many commercial partners? The more partners, especially influential companies in the industry that collaborate with the project, the better it is for the project.

8. Hard Cap

This refers to the total value of the token offering. If the offering is too high and the market cannot absorb it, there is a greater chance that the tokens will be sold off, similar to any oversupplied item.

9. Exchange

Is there a marketplace for trading the tokens? If it is a large market with high trading volume, it will significantly increase the demand for those tokens, raising their value in the future.

All these points are fundamental considerations when evaluating the price of ICOs. The most critical factor is likely the research and development team, as many aspects may improve or deteriorate in the future, depending on the management and advisors who guide the project to success or failure.

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Dr. Tanapoom Damraks, CFA.

Article by Terra BKK Dr. Tanapoom Damraks, CFA.

Email: tanapoom@uchicago.edu