The crypto space is booming with innovation and excitement, and dozens of projects and platforms leverage blockchain technology’s properties.
But for every true game-changer, there are dozens of failures, false-starters, and duds.
Unfortunately, beginners and investors often get the short side, and some can fall victim to deceptive and overhyped projects.
But one can reliably avoid mistakes by developing a robust understanding of the crypto landscape and navigating the traps as newbies fall.
Massive Supply Chain
Most cryptocurrency India has some level of inflation, with new tokens either locked or minted and distributed to stakeholders and new participants.
Inflation helps to keep proof of work and proof of stake networks secure by rewarding node operators and miners and can use as a source of funding to ensure long-term development, among other legitimate uses.
Most established projects inflate at a fair and reasonable rate -with the top 10 POS networks increasing at an average of 7.7% per year, some inflate at a considerable rate, causing a massive misbalance between supply and demand that can crush the token’s value.
New projects find this phenomenon very common. In some cases, at the token generation event (TGE), a tiny fraction of the total token supply gets unlocked. These projects usually have an extraordinarily low market capitalization (often under $100,000) but will inflate immediately after launch at a staggering rate.
Unfortunately, several new projects use a combination of marketing strategies and tactics to fuel an initial wave of hype around the token. It is almost invariably short-lived, with the promotion eventually paying way to colossal selling pressure as in-profit and early-stage investors look to exit their positions.
Since few understand the difference between fully diluted value and initial market capitalization, many investors get caught up in overvalued projects — where most of whom have limited experience with early-stage projects.
The Airdrop Scam
If you’ve ever used a smart contracts blockchain like Ethereum, Solana, or BNB Chain in the top 5 cryptocurrency in India, you’ve had hit by a few airdrop scams.
The way it works is straightforward. A typical bogus project will automatically issue tokens randomly to a selected list of recipients— based on their cryptocurrency holdings, their most recent activity, or whether they’ve been attacked earlier.
When the recipient checks on a block explorer like Etherscan or BscScan, they’ll see the airdropped token under their balance, and most investors will find ways to sell it. At the same time, some users may even check its trading price by inserting it into the liquidity pool trackers of the token contract.
The scammer will usually have set up a liquidity pool and some simulated trades to make it appear that the token is highly liquid and that the airdrop is worth a princely sum.
However, after attempting to liquidate these tokens via a DEX, the user will usually find that they cannot. It is because only addresses allowed in the token contract can send (and hence trade) tokens — an intentional trick.
In most cases, the token name will contain a reference to a website, where users usually need to connect their wallets to unlock their tokens for trading. It might lead to potential scams or hacks, where the user might hand over their identity details or approve token transfers, leading to emptying their wallets.
Early Bird Pricing
Most projects – are either entirely or almost entirely funded by early-stage investors, including VCs, angel investors, incubators, crypto exchange India partners, and other fund types.
In many cases, the token supply sells to early-stage investors at a significant discount to the public price. Before launch, projects frequently sell a small portion of their supply to public sales participants, who often expect to help market the project by promoting it to their friends and family.
It is unusual for early-stage investors to receive more than a 70% discount compared to public buyers.
When the project eventually lists on a cryptocurrency exchange India, the hope is that retail buyers will jump in to support the price, allowing early-stage investors to exit at a profit. In some cases, despite being subject to a vesting schedule and receiving only 10-20% of their tokens at TGE, early-stage investors can recoup their initial investment on day one.
Although some projects are coming about the discount early investors receive, others need to pay more attention to the prices that seed and private sale investors pay for their tokens, making it difficult to see the markup public investors face.
Many higher-quality projects are selective and specific about who can participate in their starting raises — generally for value-adding investors, i.e., those supporting marketing, growth, development, user acquisition, etc.
Market Maker Manipulation
Many crypto giants leverage market makers to ensure a market has sufficient liquidity. While this can enhance the overall health of a project, as well as deceive newbies.
In most cases, market makers are instructed to maintain the price within a specific range, so buying up tokens when the price falls and selling them when it soars.
It ensures the token’s sustainable growth and prints signs of strength on the charts, like bull flags or other bullish continuation patterns. Which potentially tricked investors into entering the cryptocurrency India buy markets.
Mostly, it is often short-lived since some projects hire market makers for a short period because they have limited funds. Following that, the token continues its natural trajectory — which is usually negative.
It is a major problem for the newly launched tokens since market maker activity can hide the natural price action, making it uncertain whether the token is a truly attractive investment.
Keeping this in mind, new investors should pay more attention to the basics of a project rather than its short-term price when it appears that it’s working with a market maker.
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