The longer people are in the crypto space the more scams and shit coins they are discovering. The same goes for me. With time I find more and more scams and I have to admit that I myself fell for some of them. But the more you look into it the more experienced people can get with these kind of “projects” and see whether they are scams or not. In this article I want to talk about some Scam or Shit Coin indicators that I am trying to look out for.
What is a Scam or Shit Coin?
Lets start of by defining what a Scam Coin or Shit Coin actually is. In my opinion it is a “get rich quick Scheme” that benefits its founders and nobody else. You could say it is a modern Ponzi Scheme so to speak. Most of the time it is based on an Altcoin. Altcoins are alternative coins to the already established coins like Bitcoin or Ethereum. Most of the time these Shit Coins are not even Coins but Tokens because they don run on an own blockchain but are built on one of the popular ones. Very often it is an easy pump and dump mechanism that brings a lot of people into the coin by using FOMO, followed by a quick dump where the main founders of this coin benefit. One of the latest examples for that was the “Squid Game Token”.
Core Indicators
So with that out of the way, what are some indicators to recognize such scams? It is important to notice that not every coin that is fulfilling some of these categories is a shit coin, but there is a very high chance of it being a scam. The first indicator, could always be the market cap. It is very easy to research. Just go on to coinmarketcap and you will see that this information is one of the most important ones. If the market cap is very low, it means that not a lot of money is invested in this coin. Now, some of you might say that newer projects might have a much lower market cap then the established ones and I agree on this point. But, if a project is really worth something the market cap will have around 100 million dollars of market cap to begin with because some early accredited investors might already invested into this project before the initial Coin offering.
Another important indicator is the community size. If the coin has a big market cap but no community it can either mean that there are just a few whales that are holding the majority of this token and just waiting to dump it to the clueless people. Or it could mean that there is some market manipulation going on some exchanges where not al lot of people are trading. Either way, a small community of a coin means also that the coin is not being used and that is why I would stay away from these kind of investments.
Going hand in hand with the previous two indicators is the third one. That is the listing on big and reputable exchanges like Coinbase or Kraken. Usually, these big exchanges are researching a coin before they are listing it on their exchange. This means that some of work already has been done for you. This means also that you probably already a little bit late to the game. But how is the saying? High Risk equals to high rewards, right? Anyhow, it is important to stress that even if the coin is listed on a big exchange it can still be a scam, so do your own research before investing in any kind of crypto project!
Whitepaper and Purpose
While you are doing your research, you might stumble upon a whitepaper. First of all, if a project does not have any kind of explanation of what this project is aiming to do, it can be immediately seen as a red flag! But even if there is a whitepaper, it is important to read it. Most of the time, if the whitepaper is too long or overly complicated you can assume the project is trying to hide something and there fore is a scam. Furthermore, if a whitepaper is not done carefully and has a lot of mistakes and inconsistencies it is also very bad. You have to keep in mind that a whitepaper should draw attention to the project and accumulate new investors. And to do so you should explain what your project is aiming to achieve in a short and illustrative manner. If the whitepaper does not do that you can assume that the person who is in charge just wants the quick buck.
Speaking about the people who are in charge. If the founder is not very enthusiastic and his interviews don’t seem to impress you, stay away from this project! If a person truly believes in his projects he will do anything in his power to make a good impression on you. Furthermore, you should look out for previous experience of the owner and the team. If you don’t find anything on LinkedIn or in the Internet at all it is also a red flag since their careers could be just made up. Additionally, if there are no people in charge listed and want to stay unrecognized it is immediately a red flag for me, for obvious reasons.
The last point I want to mention is the purpose of a project. If the purpose or Use case of a project is just to make an existing project better, it can be seen as a scam. If additionally to that, there is no roadmap which explains the further steps and goals, stay away from this token completely. Furthermore, the transparency of a project plays a big role. If the source code of the project is not open source, you could assume that something shady is going on since the normal procedure in the industry is to have everything transparent.
Conclusion
To finish up this article I want to mention that these are certainly not all indicators for scams and I want also to stress that not every projects that fulfills every one of those indicators is a scam. I just want to talk about my experience so far and wanted to share my opinion with you guys. I hope I could help some of you for your next research. If you have other indicators that you are looking out, let me know in the comments!
Published by ga38jem on
LeoFinance|Steemit|read.cash
On 5th December 2021
Useful read, thanks for this!