Seagull spread the word, text: How to detect possible scams

Two things that keep me from investing in a project

By Patch | Things of note and other interesting stuff | 16 Jul 2022

Probably now more than ever we need to do proper research before putting our crypto into a project. And one of the things to look out for is pumps and dumps and scams. Even if they are far less common during a bear market, it is still good to know some of the signs to be on the lookout for. While not financial advice it is more of a "how I do it". =)

The first sign is celebrity endorsement

This is probably the biggest warning sign of all. And it is fairly easy to detect. And sure there are people endorsing crypto that is legit, do not get me wrong. So far tho, even in these cases I would argue those crypto projects were not some of the best places to put your money. Even if they were not necessarily pump and dumps.

And I would argue the "shittier" celebrity it is that endorses something the worst it is. The person who probably holds the gold standard for this is Jake Paul. Basically, everything he is involved with is a sure bet it is a scam one way or another. And you do not have to take my word for it.

So the first step of not getting caught in a pump and dump. Avoid anything endorsed by a "celebrity". And if they are endorsing it, it is very likely it is already in the pump part of the scheme.

The second step is looking at the tokenomics

The warning sign here is not as clear as with celebrity endorsements. As they tend to happen close to the dump stage. And looking at the tokenomic will give you more of a general warning that it could happen, rather than it is likely going on right now.

The thing you need to look for here is the token distribution. The fewer people who have more tokens the more likely it is that a pump and dump can happen. This is because the more tokens one person control the bigger their actions become. And this can be great if the person is on the up and up. If they make big investments the token price will go up.

But then the opposite is also true. If the person promotes the token to get an influx of new investors. They then just sell all their tokens, cashing out. Leaving everyone else holding the bag. In this case full of useless tokens.

And you should be able to find all the information about the token allocation in the white paper. If you do not, then that is a very big red flag in the info itself.

Another red flag is if the person in charge of the project repeatedly tells people to HODL. If they do this repeatedly it is usually because they want YOU to HODL while they sell. And if you think I am a bit cynical. Think of it this way. How good and safe is the project if the person in charge constantly begs and ask people to HODL their tokens. If that is not a big red flag that problems are brewing then you are probably color blind. But no worries, because you can buy glasses now that fixes that. ;)

I hope that you found this post useful and informative. And if you think I am incorrect or made any mistakes please inform me in the comment section down below. And if you have any other smart and easy way to "test" a project please share them as well in the comment section, thank you!

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