Investing in the crypto markets can be a great way to make money, but it can also be risky. Not all investments are created equal, and if you invest in the wrong coin, you could potentially lose everything. While nobody can predict with certainty how an investment will perform in the future, there are a few red flags to watch out for. If your investments fall into any of these categories, you might want to reconsider.
Doesn't have a long track record All companies have to start somewhere, so the fact that a stock or crypto doesn't have an extensive track record isn't always a bad thing. But it does make the investment riskier, especially if the company is making promises that seem too good to be true.
Solves No Real Issues
With crypto, it’s always important to invest in projects that solve real issues, not something that's just made up. With over 11,000 coins on the market, 90% of them are absolutely worthless, yet they all pretend like they’re solving something huge with their “groundbreaking” technology.
Pump and Dump Scheme A common red flag prevalent in the crypto markets is when YouTubers, and celebrities begin shilling investments to their followers. Once they shill it, and the prices rise, they along with other insiders dump their coins. Mark Cuban was recently caught shilling a cryptocurrency token named Iron Titanium which soon came down to $0.
Fake Giveaways
Fake giveaways are used to scam you out of your cryptocurrencies by offering something free of cost in exchange for a small deposit. Typically, scammers will ask you to send funds to a bitcoin address first so you can receive more bitcoins in return. But if you make these bitcoin transactions, you won't receive anything and will never see your funds again.
Ponzi and Pyramid Schemes
A Ponzi scheme is an investment strategy that pays returns to older investors with new investor money. When the scammer can no longer bring in new investors, the money stops flowing. eg. OneCoin and Bitconnect.
A pyramid scheme is a business model that pays members based on how many new members they enroll. When no new members can be enrolled, the money flow stops.