- A highly unregulated market creates room for foul players to enter the crypto space.
- Investors are lured by high APY’s, disregarding red flags for projects.
- Signs of cryptocurrency scams mean investors will have to enhance their due diligence.
- Trading cartoonish tokens with unattainable financial promises is a form of trade gambling.
Crypto in 2021 is not dissimilar to 2017. ICO as a crowdfunder has contributed to the extension of the range of developments in crypto projects. In 2017 only 1,300 coins were registered on CoinMarketCap. In 2021, the market is less forgiving, as novice investors are more susceptible to the increased number of marketing schemes, drawn in by the promise of huge financial gains. As a result, fresh investors are prone to falling victim to crypto scams, hindering the market from developing positively in the long term.
Another Crypto Bites The Dust
WhaleFarm is the newest DeFi protocol to spark resentment in the market. The DeFi project granting users high farm-yielding results made a flash exit, wiping $2.3 million in the latest rug pull. The market exit was quickly realized as the price of the native WhaleFarm token dipped by 99.9% within minutes, leaving investors confused.
Seasoned investors, who’ve dubbed Doge and other memecoins as superficial, have cautioned against investing in new and unproven tokens. Crypto Analyst MrWhale emphasized that red flags about the projects were apparent as it offered an unsustainable APY of 7.2 million percent, all while developer information was nonexistent.
The price of WhaleFarm had traded above the $200 mark, before falling to $0.20. While scams in the DeFi and crypto space fueled by Binance Smart Chain are not a new occurrence, they represent a trip to despair for any new investors. In the crypto “wild west,” scams occur at every level, though high value rug pulls are not a rarity.
People Are Trading in a Precarious Field
Gen Z and millennial crypto investors account for 94% of all market investors. Crypto scams have presented a new dynamic for anyone entering the field, even a digital native. Stephane Ouellette, co-founder at FRNT Financial, underpinned that users are fed fake yields and returns. He argues that DeFi’s surge is similar to the ICO craze of 2017, making the ecosystem unsustainable as high speculation governs the field.
Trader Lark Davis highlighted “people love ponzis” when Safemoon gained media attention as the exact opposite constituent of WhaleFarm, as it surged beyond expectation. The DIY mentality of the new class of traders makes them susceptible to false information being disseminated on social platforms. However, the initiative of self research adds a positive connotation for current investors.
On the Flipside
- Cryptocurrencies are still highly unregulated, which allows foul actors to take advantage of naive and greedy investors.
- Avid investors are prone to emotional triggers, similar to in retail, and are susceptible to crypto scams.
- The value of cryptocurrencies is speculative, and the price of a token can explode or decrease without a full understanding of why.
- Scams will persist in the crypto space even should market regulators enforce stricter rules.
Finding Time For The Best
Research fosters “critical thinking,” which in crypto is the main determinant of whether one is investing into a complete sham, or identifying digital value. On the other hand, rug pulls are often associated with emotional triggers to redirect investor attention away from the elephant in the room.
Ponzi projects fail to divert traders’ attention towards what holds value, and that has been consistent in the market across time. A Crypto Head report indicates that what might seem too good to be true, probably is. However, it does lead to people thinking critically about their next investment, though even avid investors such as Mark Cuban can fall prey to crypto scams.
Crypto hijacking holds deeper connotations as it fosters accountability from traders. As a result, the “get rich quick” mantra pushed by the media is fading, and price surges similar to GME or other cryptocurrencies will be regarded with skepticism; thus, funds will be allocated towards resilient projects without the expectation of astronomical gains.
In 2017, the SEC cautioned about the risks associated with crypto investments, as regulations are an enforcing agent to diminishing financial losses. Furthermore, they iterated the disparities between a project’s value, and their social media association with influencers. To that end, as investors gain more understanding of the agent at play in the crypto market, the faster the space will evolve towards societal acceptance.
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