Surely you have heard of cryptocurrencies that, although they are unknown, their value increases overnight. It is not uncommon to hear of people who have earned thousands of dollars investing in these types of assets… or others who lose everything. In the ecosystem they are cataloged as shitcoinsa term used to refer to those cryptocurrencies that lack real utility.
Among the thousands of cryptocurrencies on the market, how can you identify the shitcoins? believe us, learning to recognize these types of assets will save you a lot of headaches, so we will analyze the main warning signs of possible fraud.
What is a shitcoin?
Shitcoin is a somewhat derogatory term that refers to the criptocurrencies that do not add value to the ecosystem, have failed or are a resounding fraud. Now, it is important to clarify that it can be quite subjective to qualify a cryptocurrency as a shitcoin, since the issue of utility and value depends on the perspective of each person.
For example, for some, not all cryptocurrency is bitcoin (BTC) is considered a shitcoin. For most, the shitcoins are only those digital assets fraudulent, useless or clear objectives or recognized developers. So cataloging a cryptocurrency as shitcoin often generate controversy, as there is a set of rules. It depends on the angle from which it is viewed.
So, if they have no apparent utility, what is the point of investing in these cryptocurrencies and tokens? In short, make money. These types of assets tend to change in price suddenly, which is attractive for people who want to earn a lot in the short term. This sudden variation is characteristic of any cryptocurrency with a small capitalization. So a large volume buy or sell order will have a significant impact on the price. They are highly speculative currencies.
The differences between an altcoin and a shitcoin
Altcoins are all cryptocurrencies that are not bitcoin (BTC), such as ether (ETH), litecoin (LTC), XRP, tether (USDT), bitcoin cash (BCH), monero (XMR), among others. They are not normally perceived as shitcoins because are projects that solve a problem in the ecosystemAre useful for a considerable number of people and are backed by a renowned team.
However, that does not exempt them from being considered shitcoins by some, although it is not the most popular opinion.
And what about memecoins?
One of the most popular memecoins is dogecoin (DOGE), this in part thanks to figures like Elon Musk. Could this cryptocurrency be classified as shitcoin? Again, It depends on the interpretation of each one. DOGE was born as a simple meme, which later became a digital currency.
Although at first it was considered by many as a joke, this cryptocurrency began to attract attention in the market due to its high profitability. In fact, today It is accepted by many companies and businesses as payment. Tesla is an example of this.
Warning signs: learn to identify a shitcoin
As mentioned above, there is a scale for rating a cryptocurrency as shitcoin. But these assets have common features that you might indicate that it is not a good idea to invest in them. To detect fraud, consider the following:
Who is behind the project?
The shitcoins lack a reliable team of developers and known in the ecosystem. Many of the people who make up the team remain anonymous or use false names to hide their identity. The developers of these cryptocurrencies rarely come from respected companies.
Therefore, if no matter how much you investigate, it is not possible for you to know who is responsible for a digital currency, you should interpret it as an alarm signal. Although it must be clarified that the creator or creators of bitcoin are still unknown, and that is not why the currency is classified as shitcoin.
Does cryptocurrency add value to the ecosystem?
This is one of the most subjective aspects of the value issue. What is useful for some, not so much for others. But There criptomonedas that were created for the sole purpose of enriching its developers or to make a social criticism or a joke. Beyond that, his contribution to the industry is really questionable.
For example, with Ethereum there is the possibility of creating smart contracts, something that adds value to the ecosystem and that Bitcoin did not offer in the same way. It is a vital function for decentralized finance. So based on this parameter, ether would hardly qualify as a shitcoin. On the other hand, thousands of cryptocurrencies are simply copies of other projects and offer many general benefits, but without specifying how those results will be obtained. If so, shitcoin alert!
What about your whitepaper?
The white paper is the document in which he explains how his cryptocurrency developer solves a specific problem and their goals. It is the basis of any project involved in Bitcoin technology and a clear guide for decision-making in the case of the team involved.
If you see the Bitcoin whitepaper, you will find a detailed explanation of the project, how it works and what its benefits are. And there are other cryptocurrencies that also have a whitepaper. But, what about those that do not have this very basic document or is it a copy of another? Most likely it is a shitcoin. And if you see that their whitepaper has misspellings, run away.
What are the means to communicate with those responsible?
If the digital currency in which you noticed not have a website to present the project or other digital media that can contact those responsible, off alarms. Other possibility is that yes there is a web site or social rede, but without a definite design or unprofessional. The community is an important part of this type of project.
Does its price increase in a suspiciously sudden way?
One of the most outstanding characteristics of shitcoins is the sudden increase in its price, something that tends to be a trap for the inexperienced. And it is that, if an asset doubles its price in a matter of hours, it will attract attention. Be careful in these cases. That the price of a cryptocurrency rises exponentially does not mean that it is a good idea to invest in it, since it can be a market manipulation.
A clear example of market manipulation is the pump and dump. It is a strategy to make the price of an asset rise and then sell it en masse. This is achieved by spreading false information and deception. Some use social networks and other digital media to promote the purchase of a certain cryptocurrency.
Why do some invest in shitcoins?
Those who decide to invest in shitcoins usually do so with one goal: make money in a short time. If a cryptocurrency costs 50 cents on the dollar and its price increases to one dollar, the return will be attractive. The more investors join the market, the higher its value. Therefore, initial investors try to attract more people by different means. But again, it could all be an attempt to manipulate the market.
The idea of buying this type of cryptocurrency is to do it at the beginning, when its value is very low. As soon as the price increases significantly, investors quickly sell them, so it is not a long-term investment like bitcoin or other digital currencies. In the end, the greatest beneficiaries are the creators of the shitcoin, not the investors.
So you should invest in shitcoins?
We must clarify that This type of investment is high risk., and is not recommended by experts. Although you can win a considerable amount of money in a short time, you will most likely lose it all. There are very few cases of people who made big profits with shitcoins, compared to the huge number of scams. Is it worth the risk? It depends on you.
Although the idea of investing in shitcoins may seem very attractive at first, the reality is often different. And it is that there are thousands of this type of cryptocurrency, which makes it difficult to identify those that have good profitability. To increase the possibility of obtaining profits, the portfolio must be diversified, which in turn increases the risk.
Also, it is not enough to invest a small amount of money. If you invest only one dollar for each shitcoin you choose, you may make a profit, but it will be negligible. The more money you spend on shitcoins, the more likely you are to lose it. Remember that there are no guarantees, even if developers and other investors try to convince you otherwise. This is a very high risk investment based on speculation.
Most of these cryptocurrencies disappear as suddenly as they were created and popularized. The result: a fraud. Keep in mind that just as a shitcoin can increase in price quickly, it can lose its value just as quickly. Liquidity is another factor you should consider. If there is no one willing to buy the shitcoin, you will be in trouble.
In short, before investing in any cryptocurrency, be cautious and investigate everything related to this digital asset, Although it seems like a safe investment. Do not get carried away by advertising and check for yourself.