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Cryptocurrency

Shitcoins Explained: What Are These Coins? Should You Invest In Them?

The term “shitcoins” is an umbrella term that encompasses all derivatives of failed or unsuccessful cryptocurrency. In general, they are devoid of any clear reason, these currencies do not have solid foundations to support their claims.

Their purpose isn’t clear and they are not backed by any foundations, like Ethereum or Bitcoin. The currencies are not able to sustain the long-term responsibilities associated with them. The most well-known example of this is Dogecoin. Dogecoin was forked of Litecoin in 2013, and thought of as a fun currency. It was designed as a meme coin , and was marketed only to Shiba Inu pet breed that was featured in its logo.

What Are The Factors That Give Shitcoins Worth?

Shitcoins’ value is solely derived from their existence. After their launch, the hype around their creation causes an increase in the number of investors. The mass purchase drives the cost of these coins to an all-time high within a short period.

If these investors decide to cash out to gain short-term profits, their prices fall as quickly as it rose. After all gains immediate are realized, the price of shitcoins is in the same place, not seeing any significant movement. This trend of pump and dump frequently leaves novice investors with a plethora of shit coins that are worthless.

In this case, Dogecoin draws its value from the tweets of the richest person on earth, Elon Musk. If he didn’t have his backing or publicly voiced opinions, the value of the coin could not be determined by any other factor. In addition Tesla’s CEO Tesla has announced that Tesla will accept payment in Dogecoin as a test payment.

How To Identify Shitcoins

Shitcoins have a number of alarms, despite the creators trying to cover them up. Here’s what to be looking out for:

  • Shady Developer: The cryptocurrency developers who are in the media, will be able to gain the trust of the public to add credibility to the recently launched crypto. Developers who don’t have an image are undoubtedly suspect and more likely to defraud individuals.
  • Undefined Function: Blockchains like bitcoin and Ethereum were created to enhance the efficiency of decentralized finance (DeFi) in the sense of eliminating an authority central to the system and increasing the security of transactions. BTC along with ETH are therefore stores with worth because of the benefits they provide. Shit coins are not a store of value because they have no reason and exist solely because they are able to.
  • Generic Projects: In the event, that the website is a big promise but does not have a defined function the project is likely to be an Shitcoins. These websites for projects are generally hosted on domains with no cost and are rife with typos and can even be casually created.
  • Very Few Owners: The norm suggests that a legitimate cryptocurrency should include at least 200-300 owners. Anything that is lower than this range suggests a criminal activities. A good coin to invest in should also show five to ten transactions every minute.
  • Dry liquidity pool The newly launched decentralized exchange heavily relies on the liquidity of its funds. A little less than $30,000 of liquidity is a red alert that you should avoid. It is possible that the coin will be sold at a price that is surreal in the range of 30 %, and this isn’t viable.

What Are The Things To Consider Prior To Making A Decision To Invest In Cryptocurrencies?

  • The existence of the whitepaper: A Whitepaper is proof that the authenticity of the project. Without it the cryptocurrency is unable to gain validity. Quality of the paper is just as crucial. Unprofessional design, absence of coherence, along with frequent errors are all reasons to doubt its legality.
  • Verify the developer’s claim: As layman investors majority of us prefer to overlook the technical details, believing that they’ll be difficult to comprehend.

But, this is the only way scammers can take advantage of and then over-emphasize the information. The claim may say that the project is going to achieve an end-point, but fail to elaborate on the process.

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