Cryptocurrency Tips: How to Spot Scam Coins?

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Cryptocurrency Tips: How to Spot Scam Coins?

ForexMinute.com – At present, there are over 400 altcoins in existence, each with its own set of protocols and features. While each one of them proclaims to be better than the next, a normal investor goes into a dilemma of differentiating between good and bad investments. And indeed, the chances of one’s investments turning kaput in the cryptocurrency trading sector is high.

In this section, we will try to introduce you to the world of Scam coins. We will further provide you with some tips to avoid them.

What are Scam Coins?
Think of fraudulent investment schemes from traditional stock markets before continuing to know about Scam coins. Generally, a scammer launches a fake company for which he/she asks funds from normal people like you and me. The scammer further promises us a substantial return on the investments on his company’s stocks. But in the end, the crook runs away with all the money, leaving investors in a state of what we say is a mental shock.

Likewise, a Scam Coin is launched with only one purpose – to make money for the developer. These coins are usually premined – a process in which a majority of coins are usually mined before the actual launch, or is made available to mine publicly on low difficultly. This gives the early advantage to investors to score a large chunk of coins, which they later can use to manipulate the market. Most of the POS coins we see today have a very short POW period. Here the coins are distributed 100% in a very short span of time. This makes the entire distribution period unfair.

These are some of the basic early traits of Scam Coins, which an investor should seriously notice before investing. Always make sure to know the process used in the distribution of the coins and you will get half the story.

Take the following points into consideration as well.

Unnecessary Hype
A Scam Coin is usually more about words, but less about implementation. They all usually have a large hype around them, which is amplified further via social networking, paid media, etc. These content always look attractive enough to most of the investors and eventually create a good early demand. The premined coins are thus sold quickly, and the developers disappear leaving the investors holding those good-for-nothing coins.

Shady Developers
The developers of Scam Coins usually remain in shades, or use a proxy identity to lure up the audience. If you ever get impressed with a new cryptocurrency, the first thing you should do is a thorough research of its developer. Doing a thorough background check on his previous jobs is a good start. Call or email the companies he has worked for, or contact unbiased websites to provide objective details about the developer, as well as the cryptocurrency. We recommend ForexMinute.com, CoinDesk.COM, and CryptoCoinsNews.com for the same.

Total Distribution
A Scam Coin usually has either a very low or very high number of coins. Try choosing a cryptocurrency for investment which totaling comes to be moderate, in between 10 million and 100 billion. Anything above or below the given number can be termed as a scam.

All the Eggs in One Basket
Even if a new cryptocurrency seems impressive enough and passes through each and every phase we described above, we recommend you to invest only the money you can afford to lose. A little investment in the early stages will give you a proper idea about the coin’s price movements. You can increase or decrease your investments according to the coin’s reputation at that point of time.

The cryptocurrency market still is one of the most volatile ones, so trade safely and avoid major investments on a single coin. Currently, Bitcoin, Litecoin, Dogecoin and Darkcoin are among the most trustable cryptocurrencies to invest in.

To contact the reporter of the story: Yashu Gola at yashu@forexminute.com