What is the main cause of failure of cryptocurrencies and altcoins?
Dead coins – aka the Crypto Graveyard – are becoming a phenomenon as the cryptocurrency market ages. They are starting to go up, and the proportion of those that are scams is surprisingly high.
Let’s start with the definition of a dead coin: it’s usually when developers abandon the project, take down their website (usually the result of the former), or when trading volume drops below $1,000 for three consecutive months. There are now over 1000 coins that meet this definition.
Often a coin will “die” for reasonable reasons – for example, developers cannot keep pace with rapid changes in the blockchain space – but a high proportion turned out to be simply scams. According to research from Traders of Crypto, scams account for a very high proportion of failures.
Why do coins die?
- Abandoned or no volume – 1596 pieces
- Scams (or other issues) – 528 coins
- Failed ICO or just short lived – 239 coins
- Prank or no joke – 33 pieces
- Limited volume / limited exchanges – 2 pieces
Fraudulent coins can fall into a number of categories. The most obvious is the ICO scam where there is no intention of starting a legitimate project. Another favored path is the pump and dump system, where a small group uses its influence to push the price up, before exiting at a peak that it usually determines itself.
Crypto traders note that “another form of crypto scam includes the simple theft of digital currency by hacking into investors’ crypto wallets or creating fake wallets or exchanges to steal people’s money. The classic Ponzi scheme has also made a comeback, taking advantage of the unregulated market and the difficulty people have in keeping up with developments in the crypto and blockchain space.
Which brings us to the biggest scam coins to date. It’s a dubious club that grows in numbers and ambition as we go along.
Biggest Fraudulent Coins in Crypto History
- OneCoin ($4 billion)
- BitConnect ($2 billion)
- PinCoin and iFan ($870 million)
- Gemcoin ($147 million)
- ACChain ($80 million)
- PlexCoin ($8.27 million)
- Squid Game ($3.38 million)
- PayCoin (unspecified)
- Titanium (unspecified)
Crypto traders can give you more insight into some of these scams. The OneCoin scam remains the largest to date and likely taught traders many valuable lessons in the process. He was an early fundraiser between 2014 and 2016. The OneCoin Exchange, which was the only way to cash out the coin at the time, shut down in 2017. Co-founder Sebastien Greenwood was arrested and is currently serving a prison sentence in the United States, while his partner in crime Ruja Ignatova, is still at large.
The lessons here are not complicated. First, avoid gimmick coins. Yes, DogeCoin was one of the most successful coins last year, but it was an exception to the rule. There is always one. Second, do your research. Ideally, find out who the developers are and what they’ve done before. Where do they live? A lack of transparency is always a danger sign. We were impressed by how little transparency some popular coins really offer their investors.
Avoid reward programs and so-called guaranteed returns. Make sure to keep your crypto assets safe in a trusted wallet and always use a reputable exchange. Let’s be careful there.