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Year after year, developers are launching new cryptocurrencies for investors to buy, sell, or trade. But with so much information going around on the benefits of investing in cryptocurrency coins and tokens, there doesn’t seem to be enough information going around on red flags to look out for that should indicate a red or green light for investment.
So, to keep you in the loop on what exactly you should look out for, you can use our helpful guide that’s just as informative as beginner-friendly betting guides, to help you identify scam coins and avoid them.
Red Flags
High Returns That Look “Too Good To Be True”
As the old saying goes, “If it’s too good to be true, then there’s a high possibility that it is.” With credible cryptocurrencies, funds aren’t accumulated based on potential returns generated from various investments. Instead, these coins and tokens take pride in the goals and technology belonging to them and not necessarily the potential value of the crypto itself.
Generally speaking, this selling point happens to be the biggest telltale signal used by cryptocurrency Ponzi schemes. If an investment offers a greater rate in probable returns, then it’s likely that the risk behind it is higher. So, when a coin is basing its marketing campaign on promoting the coin’s value, then we would encourage you to steer away from it. This is whether the campaign is being run through investment programs, cloud mining websites, or cryptocurrencies that come with no solid foundation. Essentially, no investment can consistently make high returns with zero risks.
Returns Are Heavily Dependent On New Members And Referrals
If the main way of generating an income for a cryptocurrency is through commissions or referrals, then note that you’re operating in a Ponzi scheme. Again, credible coins don’t grow mainly because of the number of people that own the coin. Coins grow through good teamwork, proper execution of goals, and innovative technology. There’s no need for investors to play any part in its growth by getting more referrals to invest in the coin because that is not the investor’s responsibility.
There’s Unclear Or Anonymous Ownership
A coin that offers no information on the team behind it should be sketchy to you. If you happen to find a team that’s running it, be sure to do a Google search on all the parties involved to have an understanding of their history.
In recent years, there have been several ICOs that were founded or led by people that had an existing history of fraud through acts like scamming investors of their money, stealing funds from various crypto exchanges, and money laundering. For this reason, be sure to only invest in coins that present reputable teams behind them who are respected by the community and highly skilled.
You Need To Invest First To Receive More Information
To escape being flagged by authorities, many scam coin websites present themselves as legitimate businesses found online in the form of marketplaces, coin wallet services, or cloud mining platforms. But to get more information about the service in question, these businesses will require you to either sign up as their member or make some sort of investment to learn more.
Once you’ve signed up or made the investment, the website’s content and focus will suddenly change and appear to be different from what the main focus initially was during recruitment. This will mean that you’ve fallen into the trap of a Ponzi scheme.
It’s A Closed Source And Has A Private Blockchain
Almost all scam coins are a closed source and this means that the coin’s code isn’t available to the public. But this is quite the opposite for coins like Ethereum where all its source code is available to the public to view through their Github. In this case, scam coins will also do the same when it comes to their blockchains. These will also be private so access remains limited when it comes to transactions recorded on the blockchain.
Check to see if the coin is listed on CoinMarketCap to verify its legitimacy. Here, the platform will inform you if the coin is genuine, is traded on an exchange that’s public with an available API, and has a public URL showing the coin’s supply total.
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