Naija CryptoGuide

How to Avoid Scam token in 2022

How to Avoid Scam token. I am not a financial adviser and nothing on this article should be consider a financial advice. Please do your own research.

Note: Cryptocurrency is volatile, please only put money you can afford to loos.

My mission: To help bring to you the best factors before you invest in any cryptocurrency.

If you’re a newbie in the crypto industry, don’t panic. I will guide you. Just read on, you will be able to identify tokens to avoid or invest.

In this article, I’m going to show you 7 factors if you put into practice will guild you from buying a pump and dumb (scam) coin.

There are so many coin/token in the marketplace today. How to know which one is profitable have become a big challenge to so many investors.

Without taking much of your time, let’s dive in.

How do you identify which one is a scam token/coin?

In my research, I discover a lot of individuals have been a victim buying a scam token. You don’t have to blame them. They just don’t know which token is a scam. well, you are at the right place.

I will show you how you can identify a scam token and avoid buying them. hang on with me.

This scam token some times get listed and you won’t know.They allowed the token to trade for a few months and after making lots of money they abandon the project. Those who purchase the token lose money because it cannot be traded. So they store a fake token in their wallet hoping it will rise someday. Dead wish that never exit.

My 7 found factors that I discover will guide you avoid these tricks that most scammers used to trick investors into buying their fake token and run away with their money.

Don’t take this 7 factor for granted.

Read: Bitcoin Scam: The 4 Most Commonly Scam to Avoid

What are these 7 factors? Below are the 7 factors that will guide you avoid buying their scam token or investing in their project.

The 7 factors to consider before buying any token/coin

This 7 factors will guide you from making the mistake other investors makes.

They said, the best way to gain wisdom is by learning from others.

You are early enough to avoid been trick in buying or invest in fake project or token.

1. The purpose of the token/coin.

Most crypto individuals invest in any kind of crypto they see on the internet without knowing the use case (purpose) of the token.

As an investor, you should check for the purpose of the token if it solve a problem.

Note: Please don’t invest your money if what the developer or team of the project are saying is that the token will give you 10x without listing out what problem the project will solve.

A good token is knowing for the problem they solve.

Please note that scammers are also using genuine token design to creating fake token and with the same website look and whitepaper. Be careful where you buy your token from.

So where you buy or trade token.

This exchanges are known for profitableable potential token listing with 10x. You can start buying new token with them.

They are known for listing new tokens that will give you 10x.

Read Also: How to Invest in Crypto Using Dollar Cost Averaging

2. The developer and the team behind the project.

After having knowing the use case of the project. The problem they solve, the next step is to asses who the developers are and the team marketer backing the project.

The good of this assessment is to be confident you’re investing in a token backed by people who actually know what they are doing. Also look at their website design if it look professional.

Make sure that the developers and the team backing the project have their real names and pictures. You can check for their credentials.

Look for this information:

  • There area of expertise. What did they study?
  • Working experience. How long have they been in the field?
  • There social media platform. Who are they following and who are their followers. Also when the social media account was created, how often do they post and what kind of post.
  • Previous position and skill.

Consider this as a fundamental analysis that’ll guide you avoid buying token that have no real use value.

3. Check out the white paper.

A token white paper explain about the project. It gives you an overview what problem the project want to solve and how they are going to carryout the operational system.

White paper state the amount the developers needed to be raised for the project and how many token that will be allocated to investors and total numbers of the token that will be minted or generated.

4. The distribution of token.

A token distribution is away that the developers uses to share or distribute the token to their investors, community and individuals.

It is another factor that must be look at if we don’t want to lose our money as an investor.

How developers distribute their token?

  • Developers portion some of the total token for pre-sale
  • Some portion allocated for their community- like airdrops and promotions.
  • Part of the token allocated for the expansion of the ecosystem in the future.

Please observe the wallets address of each individual. If large volume of the token is allocated to a particular wallet, you have to be careful.

I have seen where a wallet have about 85% of the total token. If the wallet sold out the token, it will crash the token and that will result to a big massive lose.

In most cases, the large volume token in a particular wallet are wallet own by the developer. what they do is that once the token price rises high they sale off their token and run away.

Please do a proper research before investing your money.

5. The total supply.

So many investors ignore this factor that will help them to identify scam token and avoid.

Do not over look this factor. It is very important.

The total supply is the total token that the developers will ever mine for the project and the market cap.

If in anyway a project doesn’t have a total supply, I suggest you don’t invest your money.

Why I suggest you don’t invest your money

Some of the developers uses this to pump more token into the market. The more you pump more token, the more the token price decreases. As an investors, you shouldn’t buy such token.

If the project have pre-determined maximum supply and is fixed, the price could go up.

Be sure to consider the total supply and the current circulation of any token before you invest.

6. The Market cap of the token.

The market cap of a token tells you if investors are interested. Market cap of a token shows the total amount of funds that have been invested in the crypto market.

The would give you a good idea of how you should value a token. A token with a higher market cap and lower circulating supply could be more valuable in the future.

7. The inflationary and deflationary token.

As an investor that want to buy token to invest, it is advice able that you check on the token you are buying.

The inflation and deflation method are two different ways that token developer uses in the crypto world. As an investor, you should know the type of token you are buying to avoid been scam.

Before I dive further, let’s take a look at what Inflationary and deflationary token means.

Inflationary token.

Inflationary token are token that does not have a maximum supply.

The developer of the token over time produce more token into the market.

This type of token are liken to fiat currency. The traditional fiat currency, the government of the country produces more money into the system even when there is no need making the currency loses it value because there are surplus of fiat currency.

In the crypto world, the developer pump more token to the market. This increases the market supply of the token and reduces it value due to the excessive supply of the token in the marketplace.

Most scam developers uses this method to trick investor. You have to be careful.

Deflationary token.

A deflationary token are token that are designed or program by the developer to reduce it supply in the market over a period of time. This is to prevent the token to be flooded in the market. The circulating supplies reduces over time as the years goes by.

Types of deflationary

Buy Back Method.

A buy back token is a system used by developers to buy back part of the circulating supply token from the market and burns them by sending them to a dead address.

This lowers the circulating supply in the market and increases in value.

Burn Through Transactions.

This method is another way developers use to reduce the volume of token in the market. The project developers program the token contract to deduct a certain percentage of the token from the circulating supply any time a transaction is made.

This happened automatically because the developer integrated it in the token contract. The more transaction carryout, the more of the token burnout. The success of the token depend on the numbers of transactions carryout.

If you find it interesting please share to your friends and family to save them from becoming the next victim.

Read Also: What Is Crypto Launchpad and How Does It Work?

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