Are You Being Scammed? Here's Everything You Need to Know About Junk Crypto
Photo Credit: R.Tsubin

Are You Being Scammed? Here's Everything You Need to Know About Junk Crypto

A recent article featured in The New York Times talked about so-called “junk crypto.” In the story, David Segal detailed how he created his own cryptocurrency in the hopes of cashing in on the craze. But his coin, essentially, turned out to be absolutely worthless.

“One day in May, I created my own cryptocurrency,” he explained in the piece. “I did it on a Zoom call with an excitable 36-year-old in Taiwan, Dan Arreola, who had posted a tutorial on YouTube about how to make, and promote, a ‘scam coin.’ It has more than 240,000 views. After a few minutes of tweaking, and about $300 in fees, I pressed a button. Instantly, 21 million coins were minted.”

Whether you call them “scam coins,” “hype coins” or “junk crypto”–  the end result is all the same. When it’s all said and done, you have nothing but a bunch of worthless cryptocurrency that can’t even get you a burrito off the Taco Bell dollar menu. So, why do they still prevail in the crypto market? Why is it so easy to buy this worthless currency off of places like PancakeSwap, where junk crypto with obviously scamming names like “VirtualCons” and “Idiot Coins” run wild?

Let’s break down what you need to know about this latest craze known as “junk crypto,” and what you need to do to protect yourself against the prevalent scam.

What Is Junk Crypto?

InvestorPlace points out that there’s a difference between a legitimate cryptocurrency (such as Bitcoin and Ethereum) and a junk crypto coin. Shiba Inu, for example, is a coin that got its first life as a “hype coin” (that is, a coin that was propelled by hype — mostly because its cute name and adorable dog mascot sold it to a hungry market), but ultimately got legs of its own.

A hype coin, or junk crypto, is a horse of a completely different color. As its name indicates, it’s driven solely on hype — and can’t be used to buy anything.

“Most hype coins, though, end in ‘rug pulls,’ a maneuver in which developers and their allies cash out their tokens as they peak amid a burst of carefully orchestrated advertising,” explained Segal in his NYT story. “The price plummets; trading ends. On the Coinopsy website, there’s a list of a few thousand ‘dead coins.’ The most common causes of death are ‘scam’ and ‘abandoned.'”

What Are The Dangers Of Junk Coins?

As has been explained countless times before, the cryptocurrency market is completely unregulated — and that’s both its blessing and its curse. The “curse” part, of course, is that unlike traditional banks — which are insured by the FDIC so you don’t lose your money in the event the bank goes belly-up — junk crypto has no such assurances. Essentially, if you invest in a hype coin, and the hype coin goes belly-up (which is more likely to happen than not), you’re out your money, and you have no recourse.

“This is a hazard-filled path to wealth, and not just because of the ever-present threat of rug pulls and other variations on the theme of pump and dump,” reported Segal in his NYT story. “Cryptoland is often likened to the Wild West, but that’s unfair to the Wild West. It had sheriffs, courts, the occasional posse. There isn’t a cop in sight in Cryptoland. If someone steals your crypto, tough.”

The best advice we can give is this: unless you can afford to lose tens of thousands of dollars in junk crypto like VirtualCons and Idiot Coins, save your money and make smart crypto investments.

Smart Crypto Investments

It goes without saying that crypto scams and junk crypto runs wild because it’s predicated on an environment of ignorance. In other words, because there are so many misconceptions and so much misinformation about cryptocurrency out there, it’s easy for scammers to thrive.

The best way to make smart crypto investments is to enlist the help of a financial professional. Cryptocurrency can be a smart investment — if you make the correct moves.