Shit coin is a term referring to the digital currency (cryptocurrency) which has no value or to refer to a particular coin as one of the bad investment choices. Here in this article we are going to see, what are shit coins? How to spot a shit coin and avoid them?
What are Shit coins?
There are many coins which got into the market after the rise of Bitcoin. These coins are not meant for investment purposes because their price just moves on the basis of speculation. Due to sudden multifold returns on the coins, they attract the people who are greedy to earn high returns in a very short time and also due to Fear Of Missing Out (FOMO) .
Within that time operators/founders of the coin dump it. Basically, they use a pump and dump strategy. These coins use the same concept of other coins and don't bring anything new to the table. These coins are predicted to go zero because of it’s flawed fundamentals. Developers just focus on marketing strategies in order to attract investors.
How to Spot a Shit Coin and Avoid it?
Here we will go through some points, which one should take care of, before investing in cryptocurrency.
Less number of Investor/Holders:
One should check the number of investors invested in that particular coin. If there are less than 500 holders even in a new coin, it can be considered as shit coin. Because it shows the interest of the people in that coin. Even if the founders are using pump and dump, they can have a high amount of transactions but less number of holders.
Volume of Transactions:
There should be constant transactions of buying and selling. At least 10 transactions should be executed per minute, this shows the activity of that coin in the market. If it is less than that, it should be considered as shitcoins. Though the volume of transactions increases with time.
Dominated by few of the Holders:
Check if, majority of stake is held by a few of the investors. For example, 10 holders have nearly 30% of stake. This is a big red flag. They can easily manipulate the price of the coin.
Low/No Liquidity Pool:
One should check the liquidity pool of that coin. One should invest only if the liquidity pool is above $ 30,000. Because shit coins don’t provide a high liquidity pool. Lock in the liquidity pool should be for a longer period of time, it can be 6 months or a year.
Developers are Unknown:
Developers should be the ones who are trustworthy. Even people in the stock market think twice before investing in the company who have 0% stake in promoters. (or who are unknown). If the founders of the coin are known or they revealed themselves publicly then there is very low chances of being a shit coin.
Having Same concept:
There are many crypto coins which are in the market and with the same concept another coin enters the market without focusing on any specific unique issue. They don’t have any specific goal, they just want to use people’s money to get rich using a pump and dump strategy.
Bitcoin has limited supply of 21 million coins, whereas ether has supply of 18 million coins per year. But some shit coins have a large number of coins in the market. Due to this there will be a very low value of coins that attract the people who think that they will have a high number of coins with very less investment. Also with the perspective of investing this coin doesn’t hold any value.
Nouriel Roubini, american economist who was best known for predicting the mortgage crisis in the United States 2007-08 once tweeted about shit coins.
Shit coins are a great way to lose money. The internet, which is rapidly becoming a graveyard of crypto that are pumped and dumped, are termed as shit coins. One should only invest the amount in coins which he/she is ready to forget/lose.