Over 95% of Crypto Coins & Tokens are Scams
So to date there is now over 11,000 crypto coins in existence. Yes, 11,000! But why do people only know a handful if they know any? Because the others have all come and gone for the most part with initial pump and dumps and then completely abandoned with plenty of victims left holding the bag. I talk about this in my book on the homepage here at Gilded Library (check it out). In fact that’s a sizeable majority of what the book is about, NOT GETTING RIPPED OFF!
It doesn’t cost much to create your own crypto alt-coins/tokens using WAVE. You can pay a few bucks, decide how many tokens you want for your network, name them, and you’re off and running. Create a snazzy website and lure in your prey. During 2017, there was what is now referred to as the “ICO Craze” (Initial Coin Offering, crypto version of an IPO) where lots of scammers would create a bunch of coins for sale and sell them at a discount (supposedly) before the actual coin launched on an exchange somewhere, and people would buy tons of them thinking they would become rich. Think of it like the California Gold Rush in 1849 where people would go claim land, buy mines, pan for gold, etc but the people that really made the money were the ones selling them the shovels. The ones making the money during these ICO’s were the so called developers who created the coin. They’d hype it, get people who didn’t understand the digital asset space really excited, and then make off with millions or even hundreds of millions in what is essentially free money after the ICO was over.
Click the above image to read about the Africrypt scam where two brothers made off with billions
So how do you NOT get scammed when you hear about some new project you like? Well, you can do tons and tons of research on the people involved, the white paper (which is usually fantasy techno jargon that reads the same), look at the timeline for when things should be completed and then make what you hope is an informed purchase. (I go into way more detail in Crypto Four Eleven on Amazon) OR, you can do nothing. Any crypto project that eventually holds it’s own on coin market cap and makes it’s way to the top 20 does so by being a legitimate project with milestones already completed. From securing the network to being listed on exchanges, creating wallets, direct communication with devs, streams and AMA’s (Ask Me Anything on Reddit), to massive adoption by major players in the business world who become partners. None of these things are going to be evident during an ICO, that’s just luck and gambling mostly.
These things still happen all the time and you can see for yourself over at Crypto Totem which ones are dropping when and what they’re about. There’s been many occasions where a bunch of guys got together, decided to create an ICO for a shit coin they created so they could all retire early and then rug pull their investors while they sip Singapore Slings on a beach in Fiji somewhere.
Beware the Rug Pull!!!
Rug pull- the act of a crypto developer abandoning their own project and running off with investor’s funds, usually in the form of sold crypto coins on decentralized exchanges.
Sometimes it’s not even a rug pull you have to worry about. Sometimes due to changes in the financial or political world, the coin just becomes worthless. I bought a coin years ago during an ICO that would allow marijuana dispensaries to actually have bank accounts and not have to store tons of cash in safes on site to run their business. It basically provided a mobile app for customers to buy marijuana from home with a credit or debit card. Those dollars would then instantly be turned into crypto for the transaction, and then the merchant would immediately turn it back into dollars and deposited into the merchant bank account the project provided for them. It was a great idea because having dispensaries was a very dangerous business holding all that cash all the time, but then something started happening all over the country that completely tanked the project. What was it that happened? Marijuana becoming legal in multiple states all over the country and banks not having to risk their charter, could now offer these business owners actual banking accounts. This torpedoed the project, but that’s just an example of what can happen even if you’re not rug pulled.
So be careful out there. Understand that most of what you’re seeing is a scam. And if the coin is ONLY going to be listed on a defi exchange like UniSwap, Pancake Swap, or Sushi Swap it’s even more likely that what you’re buying is a shit coin. There’s tons of hype in crypto and tons of communities that sprout up all over reddit and telegram for those particular coins. Be mindful and don’t get sucked in. Wait for launch and the coin to be able to stand on it’s own merit. Let it get listed on more centralized exchanges like Coinbase, Gemini, and Kraken that actually screen the project for you and add some legitimacy to your investment.
For the complete breakdown of how I grade projects and whether or not I even pay attention to them, pick up Crypto Four Eleven on Amazon for $6. Some financial firms charge hundreds, sometimes even thousands of dollars for a few pages of financial information promising to make you millions. I give you just shy of 100 pages that explain the entire crypto-sphere, the types of coins and networks they reside on, how to buy and sell assets on an exchange, a deep dive on volatility, and maybe most importantly how not to get scammed. Stay safe out there and don’t lose your wealth investing in garbage. We’ve all made poor choices but there’s no reason to make them when there’s people out there warning you about them and what to look for in advance.
Hope you all had a great 4th and 3 day weekend! Stay safe out there.