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    Published 9th July 2021

    How To Tell If You Own A Shitcoin

    How To Tell If You Own A Shitcoin Image

    The term Shitcoin has become increasingly popular, it even reached the United States Congress in 2019. We put together some research to determine what a Shitcoin is and how users should interact with them.

    What is a Shitcoin?

    A Shitcoin can be defined as a cryptocurrency with little to no value. For a coin to be considered a Shitcoin, it must have no clear purpose. The term was first coined on the internet. It sounds sarcastic and insulting because some people believe Shitcoins are a cheap attempt to recreate the success of Bitcoin. But Shitcoins are as much a part of the cryptocurrency world as any other coin or token. They are now so mainstream that they received a mention in the United States Congress.

    These coins became popular in 2018 after several high profile cases of coins being pumped and dumped. Pump and dump is defined by a group of people accumulating a particular commodity, in this case, a cryptocoin. The group then artificially pumps the price up by spreading misinformation, and then dumps it onto unsuspecting users who believe it is a good investment. However, the price often quickly drops off once the original pumpers sell and users begin to catch on. This is known as pulling the rug.

    If you’ve ever watched The Wolf of Wall Street, it’s similar to Jordan Belfort pushing worthless penny stocks onto eager investors. However, some penny stocks can be a worthwhile investment. In this article, we look at some famous examples and discuss whether all Shitcoins are bad.

    Examples of Shitcoins

    DogeCoin

    There is much debate surrounding the definition of DogeCoin and whether it is a Shitcoin. It had no value when it was created, and the coin is believed to have been started as a joke to mock the crypto-economy. So, the coin had all the major symptoms of a Shitcoin.

    However, Elon Musk, cryptocurrency’s most controversial figure, added significant value to the coin after a series of tweets and interviews professing his love for the currency. He even stated he would work with developers to improve the coin. This caused a massive rise in value. DogeCoin’s total market cap is now at around $35billion, which is just less than twice as much as the largest supermarket in the UK, Tesco PLC. In the last year, DogeCoin has become cemented around the top ten cryptocurrencies.

    Feed Every Gorilla (FEG) Coin

    In May 2021, a crypto trader invested in what his words were a couple of grand into a coin called Feed Every Gorilla (FEG) token. The coin was aggressively pumped, and after a week he sold his coins for a profit of $500,000. We’re sure if we spoke to this man, he would have no problems with Shitcoins. However, if you look at the chart, you can see how steep the decline was after May 12th 2021. If you had invested a couple of grand into FEG coin on May 11th 2021, your opinion on Shitcoins would be very different.

    The official website for FEG says the coin is a progressive deflationary Defi token that is built to succeed. They also say they have a purchase to provide money to a charity that preserves gorilla populations in Africa. After its launch, the coin was posted across multiple social media platforms generating hype around a coin that could get you rich quick. A telegram group grew from a few dozen crypto enthusiasts to 40,000 wannabe investors hoping to get-rich-quick. The group was constantly active, with new members being added round the clock. This grew the attention and price of the coin. Until, a select few people collectively exited the coin with $120million in profits in a couple of weeks, causing the price to dump.

    It’s a mystery whether FEG was launched with the view of becoming a long term token that revolutionises DeFi and has a charitable purpose, and was then hijacked by pump and dumpers, or was that the plan the whole time?

    SafeMoon

    SafeMoon has one quadrillion tokens available, currently valued at $0.000003009 per token. It launched in the first quarter of 2021 with a WhitePaper and a focus on community. It has three main features which it believes sets it apart from other Shitcoins. It discourages people from selling by charging a 10% fee whenever any is sold. Of that 10%, 50% is distributed back to current holders of SafeMoon. 25% is sold to Binance, and the other 25% is added as a liquidity pair on pancake swap. This process is about creating liquidity and rewarding the community for holding on.

    Despite this, there is no utility or purpose to this token. Even after reading the WhitePaper, the purpose of this coin is unclear. But there is hype around it, social media attention and a buzz. Due to the hype, the price has been so volatile, with steep increases and sudden drops. SafeMoon’s hype didn’t come from being a valid replacement for our current financial system, it came from “celebrity influencers” like Lil Yachty and Jake Paul. And, its only real purpose seems to have been to make a few people rich.

    Do I own a Shitcoin?

    Bitcoin was a coin with no holders and very little value at the point of its creation. Every coin must start somewhere. This is why it’s not fair to call every new coin a Shitcoin.

    It’s important to do your own research to discover whether a coin is a good long term investment. We put together 5 steps we found in our research that will help you identify whether you own a Shitcoin. These steps are not all the research you need to do, but they are a good start.

    How Many Holders Does the Coin Have?

    The first thing you should check when investing in a new coin is its holders. You want to know how much power each holder has. If you spot suspicious patterns within the holders, you know to avoid it. For example, a huge red flag would be 10 wallets holding 5% each. This is because if those ten wallets were working together and decided to sell once the coin had been pumped enough, the rug would be pulled from the rest of the investors’ feet.

    There are some positive signs to look out for. For example, if the majority of a token is held in liquidity or dead tokens. This essentially proves the decentralisation of the coin. There is much less chance of a rug pull and corruption if the wallets with majority control are automated. Another positive sign is a coin with many holders. The more holders there are, the less influence each wallet has on the market.

    Check the Liquidity Pool

    Pump and dump scammers rarely provide a large liquidity pool. They do not require one for a short period of time before they dump the coin and run with their profits. If the liquidity pool is large make sure it is locked for the foreseeable future.

    A helpful website for analysing liquidity pools is PooCoin or UniSwap. The apps provide solid assistance in identifying scams. By entering a coin’s contract address, you can view a coin’s liquidity pool, how long it’s open for, and the trading history. A coin’s contract address can be found on BSCscan for Binance Smart Chain projects or Etherscan for Ethereum projects.

    Make sure the coin has a website and twitter account

    This one is an easy way to spot a coin without potential. A coin without a social media account or website is not set up for long term, steady progress. It is either lazily set up with little ambition or for a short term pump and dump. It is not just Twitter as well. Most successful coins will have a range of social media accounts. If you spot a potential investment, check for any chat on Reddit, a Telegram or Discord chat for the community, a YouTube channel, etc. That way you can research the coin more before you put your money into it.

    Branding of the project

    Coins with attractive names and graphics will attract the attention of a wide audience. However, not every coin that catches attention is set up for long-term progress. For example, coins like Feed Every Gorilla reached the heights they got to because the names are amusing and eye-catching. But they still had the rug pulled.

    There is no real formula for this. But, if the coin caught your attention, it is likely to attract other people’s attention. They are more likely to take off than a coin with no image, boring design and a regular name.

    Check for the teams identity

    This is the simplest way to rule out a pump and dump scheme. Pump and dump schemes are a legal grey area in the crypto space, but whether they are illegal or not, people don’t want their face related to one. However, a large section of crypto is anonymous. The secretive, decentralised nature of the space has brought many people to it. So, don’t assume, because the team is anonymous, it is a scam. But the coin is more likely to have a purpose and real value if its website has a page on the team members and links to their social media accounts.

    Why were Shitcoins invented?

    Although Shitcoins are new technology, pump and dump schemes are not, and they can be very profitable. But the schemes used penny stocks before emerging cryptocurrencies. In 2011, rapper 50 Cent reportedly made over $8million in one weekend through pumping a penny stock named HNHI. HNHI is a headphone distributor. The American rapper bought 30 million shares and repeatedly tweeted over the weekend telling people they could “double their money” and that the company was “no joke.” The result was a 290% price increase, with each stock rising by 29 cents.

    Although this example is irrelevant to Shitcoins, the idea behind it is the same. It’s an example of the immense potential profit returns if the pump and dump scheme works for you. It also shows how easy social media has made it to spread hype around an investment if you have influence. Groups like Telegram and Discord have made it easy for normal citizens to spread hype. Before social media, only people with powerful friends in the media could provide enough hype around a stock to pump it. That is why some people argue that Shitcoins have brought power back to the people.

    And of course, the bottom line is that investments are meant to have risk. Statistics show that 80% of investments made by VCs crumble to zero. 10% of the companies a VC invests in break even and return profits. But it is the other 10% where things get interesting. That 10% is the companies that sky rocket, that return the VCs investment by 100x, that go “to the moon.” It’s this 10% that keeps the VCs looking for the next investment. In the crypto space, the coins that will bring the 100x returns are undoubtedly the Shitcoins. People are aware that they may lose 80% of their investment, but will continue to search for that 10%.

    Negatives of Shitcoins

    Unsuspecting users don’t realise they’re entering a pump and dump scheme and end up losing their money. That’s why it is important to do your own research. Imagine the consequences of someone entering a coin with the hope of a long term investment to save their life savings and attempt to earn enough to continue paying their mortgage, and then the rug is pulled, and they lose everything.

    Should I buy Shitcoins?

    The biggest conclusion to stress when it comes to Shitcoins is to do your own thorough research. We have provided 5 steps that are essential when identifying a Shitcoin. However, you must identify whether a coin is a scam, is set up for long-term success, or is a way to make some quick money. As we are not financial advisors, we cannot tell you whether you should or should not invest in Shitcoins. We hope this guide has explained how to identify one, help you identify worthless scam coins, outlined the positives and highlighted the serious negatives.

    Check out our twitter and let us know what your opinion on Shitcoins is.

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