Crypto communities on Reddit are the source of the hype behind MemeCoins, is this a danger for new investors?

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After the rise of Dogecoin fueled by r / SatoshiStreetBets and Elon Musk Tweet in early 2021, many online cryptocurrency communities began to greedily push their own tokens. From ‘Revolutionary Tokenomics’ to Charity Coins, every MemeCoin imaginable has started capturing novice investors with promises of massive payouts, BitCoin potential and being the next to ‘go to the moon’. Fortunately, some have, but many – including ZepellinDao and Aussie Safe Shepherd – haven’t. Now, and although the crypto market has recently started to emerge from the post-binge crisis, the majority of new investors who invested in these MemeCoins when the market was high – some risking all their savings – are still lost.

For every comment that criticizes one of these tokens, there is an onslaught of responses including “this is the way”, “to the moon” and “diamond hands only”. While the sustained optimism of many investors that their specific token will be the next to take off is admirable, for an outsider it can be interpreted in multiple ways; among these, cult and exciting.

For new investors hoping to capitalize on what experts claim to be another period of cryptocurrency growth, this is where the danger comes in. Many are not well versed in conducting due diligence adequate, whether it is to verify the creators of a project and establish credibility or to understand the red flags to watch out for. For this reason, entering a support and validation echo chamber – any dedicated Reddit forum for a token – allays fears and arouses excitement, prompting many to throw their hard-earned capital behind tokens that they know little.

This exposes these investors to the risk of not only investing in tokens that may fail or are rugpulls, but also places them in a high risk category for scammers. Indeed, many of these new investors believe they can get rich quick, as long as they can identify the next newcomer. Unfortunately, crooks understand this all too well and carefully set their traps in these same forums with great success. According to the Federal Trade Commission, more than 7,000 crypto investors have reported losses of over $ 80 million through these scammers since October 2020, more than 12 times the amount reported the previous year.

So how can newbie investors better protect themselves? While there is no guarantee and no potential risk in any investment scenario, there are a number of due diligence steps that can be taken and scams to watch out for. Below is an overview of common scams both in the Reddit forums and in the real world, along with ways to avoid them.

Social engineering

What it is: Social engineering is essentially repackaged phishing for the crypto age. The crooks post links, usually veiled as a telegraphic link, a link to claim a prize or free cryptocurrency, or other useful crypto-related information, which aim to glean personal information, to capture the sentence of leaving a wallet or enticing investors to send cryptocurrency. While it’s common on forums like Reddit, these scammers also use email, other social media channels – like Twitter or Facebook – and newsgroups to run their plans.

How to Avoid It: Don’t trust or click links to get free crypto gifts, don’t share personal information, including your email address or phone number, and don’t share your phrase starting point.

Fake coins

What it is: Scammers create tokens with names and stock codes similar to other popular coins. Investors who enthusiastically rush to make a purchase accidentally buy the fake token instead of the real one.

How to avoid it: Take your time to make a cryptocurrency purchase. Triple-check the coin’s website for purchase instructions, to verify the chain it is built on, as well as the exchanges it is available for purchase on. Before clicking on the “buy” button, double-check the name and stock symbol.

Pumping and emptying group

What it is: A group or forum sends out an invitation for a token presale, claiming that they are going to pump a token to throw at the general public for a profit. Organizers, however, have already taken their profits from early investors and threw the coin at the group instead of the public upon release.

How to avoid it: Don’t accept random invitations to pump and dump groups or private token sales, reputable developers will usually have open public calls for early investors through their channels and websites.

Gas trap

What it is: One commentator posts the seed in a wallet full of ERC20 tokens and claims that for anyone interested in these tokens, all they need to do is transfer Ethereum to that wallet to pay for gasoline. During the transfer, a bot immediately takes ETH and the investor loses his Ethereum.

How to Avoid It: In the crypto world, no one realistically gives tokens or coins for free. Unless you’ve specifically entered a contest run by a reputable organization or exchange, this is most likely a scam.

Fake exchanges, apps and browser extensions

What it is: Scammers in forums will post links under the guise of being helpful, but instead of linking to real apps, exchanges, or browser extensions, they send links to knockoffs convincing. Once an investor enters their login details, the scammer not only has access to their wallet or login details for their exchange, but also more personal information that can be used in other scams.

How to avoid it: Don’t click on random links from strangers on the internet, no matter how useful they are. Instead, google for the name of the service you want and before entering any details, triple check web addresses and make sure you are going to the official site. Additionally, avoid clicking on “ad” versions of exchanges, apps, or browser extensions within Google, as scammers also pay to have their bogus websites shown as ads on certain searches.

With so many success stories overnight and what appears to be a long road of growth ahead, the cryptocurrency market – along with the hype generated by online communities – can lure in many oblivious investors with promises. of great success. Although the tactics used by crooks are becoming more and more sophisticated, the best way to stay safe remains the same as in any other investment setting. This means performing proper due diligence on potential cryptocurrencies and staying vigilant against scams. Only by doing this, newbie investors can enter the crypto market with greater awareness and reduced risk of becoming a victim.

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