How To Avoid Crypto Scams

Author: Harshit Dugar

The world of crypto comes with a myriad of related projects and NFT collections. You’d think a good portion of those projects are bound to end up being rugpulls, scams or simply dead in the long run. Well, you’re right!

Financial security and risk management are important here as they make us question the projects we choose to invest in, and ultimately, their trustability. That said, let’s see if we can figure out how to tell a legit project from a malicious one, so we can defend ourselves against potential financial threats. You ready? Here comes.

Check their socials

Scam Control 101 tells us to - JUST LOOK AT THEIR SOCIALS! As silly as it may sound, sometimes a mere look at a project’s social media may expose quite a few red flags lurking behind the scenes. Speaking of red flags, check whether Project X offers anything other than being another ‘1000x BSC Gem’ (those are my favorite). What is their supply? Is it another one of those “trillion supply tokens” promising to burn through it in the next two years and make you rich? Look at who the people running the project are and try to track them down elsewhere. Do you see someone claiming to be a crypto dev with no prior presence anywhere in the crypto world? Pull up their comment sections. Are there crowds of “followers” all thanking the project for “making them trillionaires overnight?” You see one of those red flags, or a combination of all - chances are, that project may be a scam.

Avoid “Inu” names and slogans like a plague

A huge red flag for me is an ‘Inu’ at the end of a project’s name. No, I’m not talking about Shiba Inu. I’m talking about other projects that try to exploit the token and its name. The obvious red flag here is that these projects don't seem to have much in the way of creativity going, beyond just adding an “Inu” to their names. Think SpaceX. Would you trust a dozen of new space companies that sprung up in the wake of SpaceX’s success, bearing names like “SpaceZ”, or “SpaceB” and promising to send humans to Jupiter in two years? Then why would you trust another “Inu” token?

You see one of these shady "Inu" projects/tokens followed by a catchy slogan like “missed Shiba in 2020?”, “shitcoin to the moon”, “shitcoin hits new ATH”, “Metaverse-ready coin”, or “this shitcoin will make you a millionaire!” (my personal favorite) - best stay away! Other common patterns involve these projects bragging about insane “price rises”, “free airdrops” and providing “10000% staking rewards”. Well, you get the idea.

Learn key parameters of the project

Okay, this one’s super important, so pay attention! You need to know the tokenomics, the whitepaper, the team, the partnerships and every other essential detail about a project before you put a penny into it. Period! Know how the token is sold, how much of it exists, is it well-priced, is there any ‘free distribution of the token’ (which is a huge no-no for me) and so on. Every token or coin usually comes with a whitepaper (a document detailing its functions and tasks). Reading it is a good idea.

Another huge aspect is what kind of places the coin lists on. Most scams list with PancakeSwap and such, but never really make it to the major exchanges like Binance, Coinbase etc. Why? For the same reason that the Mob doesn't have their smuggling operation registered with the Business Bureau. Capiche?

Another important thing for me is the token’s community and its size. In general, the larger the community, the larger the volume of trading, the higher the price can go. The project is built by the people in it.

Don’t FOMO

Some may argue that FOMO (or the ‘Fear of Missing Out’) is actually a good thing, because it makes you more ambitious, which is also important in its own way. However, emotions and trading/investing are two parallel lines that will never meet.

Sadly, crypto is infiltrated by FOMO: people buy "this new coin" because they see someone else buying it. Take the Squid Games token as an example. What a rigmarole that was! Created in the hype of the eponymous Netflix Drama Series, the token went on to make an ATH of $2,800 in a very short period of time, only to be soon rug-pulled by its own devs and crash down to $0.001, leaving holders $3 million out of pocket. 

Best advice here is to resist the urge to hop on infant tokens. Wait till they grow to become toddlers, before cutting yourself a nice slice of that cake. While scam coins may give you short-term returns, coins that have been around for a while will provide you with consistent growth over long periods of time. I’ve learnt this from the stock markets and I think it's pretty relevant in the crypto space as well. Of course, even consistent projects like Luna (Terra) and UST (Terra) can fall, but the general risk is minimal.

Keep the wise words by some random dude on Reddit close to your heart, “When you invest, leave your heart, mind and greed out the door. Only go for quality without thinking of the rewards you’ll reap.”