How to Spot Crypto Trading Red Flags
Since cryptocurrency has emerged, it has become extremely controversial in various aspects. Sceptics consider the digital currency as highly speculative and treat it as another bubble. Environmentalists’ common complaint about cryptocurrency is its rigorous usage of energy. But despite the controversies, the said digital currency still gained popularity to investors worldwide. Those who have been in the business for a long time probably know the risks that come along with crypto investment. For amateurs and newbies, it is necessary to do thorough research to avoid falling into traps, unreliable projects and scams that involve crypto. So before you take a leap in buying your first crypto, these are the warning signs that you must watch out for.
Anonymous Management or Leadership
Leadership is one of the essential matters that you must consider before investing. You can check on leadership by looking for other projects they have been working with. Make sure that they haven’t been involved or associated with illegal activities such as scams. Check their previous accomplishments and history.
Although the world’s first and largest cryptocurrency, Bitcoin, was created by the anonymous Satoshi Nakamoto, the logic behind it is the creation of the foundation of decentralised currency. Bitcoin has already been established, and community developers are working on the continuity of the digital currency. When considering other alternative coins, make sure to do a background check on its community and developers.
Almost all cryptocurrencies and altcoins have websites that you can freely access anytime. Always check for signs of trouble, such as typos and incorrect grammar. Do not ignore the errors, or you are likely to fall into scams if you are not vigilant enough. In this age where we can all have access to spell checkers and copywriting services, there should no longer be room for errors in any crypto’s promotional materials. For instance, Bitcoin Revolution is an example trading application website that is highly secure and with a top-notch security system.
Lack of Team
One of the issues that need to be addressed before investing is the number of people involved in the project. How many people are working behind it? How big is their community? If a cryptocurrency is just new, do not expect a huge number of members in their team, rather expect a few people working full-time. There are some available online applications that may help you track the activity of the team.
While some cryptocurrencies like Bitcoin and Dogecoin were personally tweeted and promoted by celebrities, for instance, Elon Musk(Tesla CEO and co-founder), others focus more on promotions and endorsement rather than improving their features. Be wary of a project that spends thousands of dollars on celebrity endorsement but lacks full-time developers.
A good product is not backed by celebrities alone. It should focus more on improving its line and keeping its network secure.
Not listed on major exchanges
A top crypto exchange like Coinbase includes only the legitimate ones as it remains strict on its standards in choosing the coins they list. Most of the major exchanges include as many coins as possible. If the coin is not available in these exchanges or is difficult to access, you must be cautious.
Every legitimate cryptocurrency should have a whitepaper that serves as a foundation for its future goals and plans. If a cryptocurrency does not have one, then it only suggests having no clear plan.
Make sure to take time reading the whitepaper to have a grasp of the cryptocurrency’s plan. Having a clear plan somehow gives you a sense of security.
The bottom line
As all cryptocurrencies carry certain risks, it means that there is a great probability that you may lose as well as gain rewards. With the headlines of some major cryptos like Bitcoin and Ethereum hitting the all-time highs, it is truly tempting to try out investing even just a small amount in digital currency. However, in choosing the right cryptocurrency for your needs, you must first examine its background and features. Watch out for the red flags. Also, it is recommended to ask for experts’ advice. And most importantly, due to volatility, do not invest more than you can afford to lose.