We have heard it all before, that the cryptocurrency market is the last fully open market. It is the Wild West, and there is danger lurking all around you If you aren’t careful, you could end up losing everything. All it takes is one mistake, one mishap, or being careless for only a few seconds. In that short time, your entire financial fate could be completely turned upside down. If you are passionate about Bitcoin, or cryptocurrency in general, you have probably heard this all before.
But do you actually know what some of the biggest signs of danger are that you need to be looking out for? Knowing these things could help to prevent you from financial ruin.
Risk-Free Money
If there is anything that we should all know about cryptocurrency, it is that this is a market filled with risk. Nothing comes easy, and nothing is completely safe. In early 2022, the hype of the market was centered around the stablecoin UST and Terra Luna. By simply depositing your UST onto Anchor you were able to earn nearly 20% interest. This was during a time before the summer of crypto lending insolvencies began. Earning yield with your crypto was not only popular but it was thought you were wasting your potential if you didn’t participate.
Staking or lending was considered risk-free money, and no one really thought too much about the risks. After all, if you were earning an interest of 20%, it becomes much easier to put the risk in the back of your mind and ignore it. As we all know, these types of insane rates aren’t sustainable and UST/Terra Luna would become de-pegged. This eventually caused the domino effect that led to the summer of insolvencies. There is no risk-free money in crypto.
Heavily VC-Backed Projects
The next sign of danger is often confused as a strength. When I first entered the cryptocurrency market; I thought that crypto projects that were backed by some of the largest VC investors were likely to be the cream of the crop. It bolstered their reputation. After all, if those big players trust in the project, I probably should too.
But the longer you are in the cryptocurrency market, the more you will learn that everyone is in it to make money. Especially VC investors. They will shill their projects constantly on Twitter and YouTube, but will secretly be using you as their exit liquidity behind the scenes.
Some of the largest culprits of this during the last cycle were alternate Layer 1s. Blockchains such as Luna, Avalanche, Near, Solana, and the list goes on. These VC backers would declare that these new chains were necessary, and how their tech blew Ethereum or Bitcoin out of the water. That they were the next big thing. That phrase in itself is another red flag. Anytime someone tells you a specific chain is the next big thing in crypto, always be skeptical. Always remember that they likely have ulterior motives.
Influencers & 100x Gains
In normal life, if there is something that we don’t know, one of the first things we will do is search for the answer on YouTube. This is one of the reasons many of the newest people in the crypto market will become large fans of crypto YouTubers. But, these new investors are also the most at risk as well.
Many of the crypto YouTubers give the impression that they are very kind, experts in the market, and care about you. The truth is that they only care about their bottom line. Some of their most popular videos are when they talk about altcoins whose price will go up by 100x. Anytime an influencer says this, it should be another warning flag. They have likely been paid by that project to advertise it. Or even worse, they will dump these same coins on their users after shilling them in their videos. Unfortunately, this has happened time after time.
No one on YouTube, Twitter, or anyone on the internet should be trusted when it comes to cryptocurrency advice or even financial advice in general. It is always best to do your own research and come to your own conclusions.
While these are only 3 warning signs of danger that you should be looking out for in the cryptocurrency market. The harsh reality is that there are many, many more. However, the longer you have been in the crypto market, and the more time you have devoted to learning about it. The easier it will be for you to begin to notice these signs everywhere.
How about you? What are some signs of danger in crypto that you notice?
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