Alt coins,  Commentary,  Opinion

The Trouble With Scam Coins

Why are people putting their life savings into coins that make them lose everything?

Most people don’t get rich overnight…

Every now and then a new story will emerge of someone throwing $5000 into a random coin and becoming a millionaire in a matter of months. It’s the investing equivalent of winning the lottery. People are able to quit their jobs, follow their dreams, buy a mansion and live happily ever after. That’s the story the news tells, but the reality is much more grim.

There are the rare instances where someone actually does make it big off the right investment at the right time into some altcoin with little to no usability or backing behind it, and good for them! They made it big off of nothing but luck, and they should be proud of that. Their financial problems should be solved for the rest of their life and they no longer need to worry about working a 9-5 job. However, many people face the opposite fate, and end up losing thousands, which could throw them into financial jeopardy. It’s the cryptocurrency equivalent of betting on penny stocks. There’s a chance you could increase your money tenfold, but you can also lose everything. 

The equivalent of penny stocks

The majority of news outlets never talk about the people who put thousands into DOGE at $.70 and lost nearly 2/3 of their money. They rarely talk about the thousands of people who have fallen for countless pump and dump scams. A recent example of a coin that actually ended up hitting the news is the Squid Game token (SQUID). The coin’s price went from $13 to almost $700 in a matter of hours, and then proceeded to drop to nearly $0 within a matter of minutes. The developers of the coin grabbed the cash and ran, leaving investors confused, angry, and saddened. 

Unfortunately for these investors, this was entirely their fault. The cryptocurrency market is very sparsely regulated, and it is up to the investor to do their own research into the fundamentals of a coin before buying into it. It’s absurd to think that you’re going to make a million dollars off of a $5000 investment, and that should never be the intention of someone buying into the crypto space. There are so many ways to check the legitimacy of these coins, most of them a Google search away, and yet people refuse to do so, instead buying into hype from a Twitter post they saw. 

It’s easy to buy into hype

Twitter is a great tool for cryptocurrency, but is also a weapon that hurts it. It allows creators and communities to interact, form tight-knit circles, and share valuable information that will benefit the community as a whole. At the same time Twitter draws in people with zero knowledge of the market and they see all these scams being posted by bots and scam projects promising “1000% returns in a month”. Many of these scam coins have no liquidity, meaning you can buy into them, but the coin doesn’t have any actual value even if the price pumps, so the buyer can never cash out into another coin. I have seen instances of this among people I know, where they will make potentially millions or billions, but can’t actually get any money out of the coin, so they’re stuck with what could be considered a small fortune in some random token on Uniswap

Instead of buying into hype, a good and educated investor in the cryptocurrency market should examine the fundamentals and team behind a coin to see if it is worth their investment. There are a couple great questions an investor can ask themself before buying into a coin. What is the purpose of this coin? Does the team seem to actually care about the project and its goals, or are they just trying to make a quick buck? Does the project have a roadmap laying out what the next steps for it are? These are all things a smart investor should ask when investing in a coin, instead of buying into one that is named after their favorite Netflix show.

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Elijah Pollack is editor-in-chief of Modern Consensus. He has previously co-hosted the Audible podcast Extra Credit. Elijah has published work in the past for Book and Film Globe and The Observer.