The fast-growing cryptocurrency market has attracted a lot of public attention recently which applies also to executives in family offices. The surge in the public interest in BTC and all other altcoins has led to rising demand for cryptocurrencies around the world. However, the cryptocurrency market is volatile with high price fluctuation and regular crashes in this market might also lead investors to face significant losses in a short duration. In addition, investing in digital assets has incomparable risks such as executing private key(s), crypto products and networks and irreversible crypto transactions.
Besides investing in existing cryptocurrencies in the market, many investors and family offices are also looking for potential Initial Coin Offerings (ICOs) to invest in. However, it has become mounting difficult for new investors to distinguish a legitimate ICO from an unfavourable one. As there is yet a limited amount of regulation on ICOs, there is a greater chance of fraud when investing in ICOs than in financial stocks, bonds or even alternative investment Venture Capital (VC) funds. For that reason, due diligence is one of the most important steps when ones consider investing in both existing cryptocurrencies and ICOs. The main aspects of the due diligence process for investors to consider are advised mainly in five steps: (1) Evaluate the ICO project and progress reporting (i.e. white paper), (2) check the background of the development team, (3) take a close look at the funding resources of ICO, (4) detect public interest and finally (5) determine the investment exit and trading potentials.
