The word “shitcoins” refers to all of the repercussions from failing or already failing cryptocurrencies. These currencies, which are usually devoid of any discernible purpose, have no foundation for existence and lack the fundamentals to back them up. Unlike Ether and Bitcoin, these currencies have no lifespan since their function is unknown.
Have you ever seen this word used on social media or in crypto-related forums? So, now you know what the phrase implies.
What is a shitcoin?
A shitcoin is a cryptocurrency that, in one’s view, is a bad investment. Parts that do not fulfil a specific function are also referred to by this phrase. A shitcoin is a cryptocurrency that has little or no value, or a digital money that serves no immediate, obvious use. The phrase is a derogatory term that is often used to characterise altcoins or cryptocurrencies that emerged after bitcoin became prominent.
A shitcoin’s value typically declines owing to a lack of investor interest since it was not issued in good faith or because its pricing was based on speculation. As a result, these currencies are regarded as poor investments.
What gives value to shitcoins?
Shitcoins’ worth is derived only upon their existence. Speculation about their formation resulted in an inflow of investors who infuse money at the start. Bulk purchases cause the price of these coins to rise dramatically in a short amount of time.
When these investors cash out for short-term profits, their stock price falls just as swiftly as it gained. After all of the quick benefits have been realised, the price of shitcoins remains stable with little volatility. This pump-and-dump tendency often leaves unwary newbie investors with a slew of worthless shitcoins.
Dogecoin, for example, derives its value on the tweets of the world’s wealthiest person, Elon Musk. Without his backing and publicly publicised thoughts, the coin’s worth would be meaningless. In addition, Tesla’s CEO indicated that the firm would take Dogecoin payments on a trial basis.
How to recognize shitcoins?
Despite creators’ efforts to conceal them, shitcoins have numerous big red flags. Here are some things to watch for:
Shady Developers: When cryptocurrency developers are visible to the public, they inspire enough faith in the people to give newly issued crypto credibility. Faceless developers are certain to be suspect and prone to defraud people.
Undefined functionality: Blockchains such as Bitcoin and Ethereum were created to promote decentralised finance (DeFi) by eliminating a central authority and increasing transaction security. Because of the usefulness they offer, BTC and ETH are hence repositories of value. Shitcoins have no function and exist just for the sake of being.
Generic projects: If a project makes huge claims but lacks clear functionality, it is most certainly a shitcoin. These project websites are often hosted on free domains, are littered with mistakes, and are even sloppy in design.
Few Holders: According to the criteria, a reputable cryptocurrency should have at least 200-300 coin owners. Any value less than the bottom end of this range indicates malevolent behaviour. A good cryptocurrency to invest in should have 5-10 transactions per minute.
Dry Liquid Pool: A newly created decentralised exchange places a strong emphasis on liquid money. A cash deposit of less than $30,000 is a major red flag that you should avoid. The currency may even be offered at absurd discounts of up to 30%, which is not sustainable.
Where to buy shitcoins?
Shitcoins may be acquired on various major cryptocurrency exchanges, the overwhelming majority of which are merely small-cap altcoins.
As already stated, shitcoins are always subjective. As a result, it is hard to provide clear advice as to which platform you may utilise to receive them (if that is your goal).
As a general guideline, search for platforms that are particularly created for traders that prefer to swing cryptocurrencies. Binance, Bittrex, and other legitimate exchanges are examples of such platforms. Make a point of transferring the coins from your exchange wallet as soon as you get them.
What should be checked before investing in a cryptocurrency?
The existence of a project white paper: The existence of a white paper demonstrates that the project is real. Without this, the cryptocurrency is become invalid. The white paper’s quality is equally crucial. Its poor structure, lack of uniformity, and numerous mistakes are all factors to call its legitimacy into doubt.
Take a look at the developer’s promise: As lay investors, most of us prefer to dismiss technical issues because they seem incomprehensible. However, this is the sole practise that fraudsters use to enhance the material. It may suggest that the initiative will accomplish a certain aim but does not specify how.
Why would you want to buy shitcoins?
Small-cap cryptocurrencies may be the most “high-risk, high-reward” investments you can make. You have a very good probability of losing all of your money. However, you may find yourself in one of two scenarios on rare occasions:
Your shitcoin becomes a victim of a pump and dump scheme.
The shitcoin you’re holding isn’t really a shitcoin, and you’ve become a “early adopter.”
Both of these scenarios may be quite lucrative if you establish clear objectives for when you want to sell. In certain cases, a little investment might provide the greatest results. Just make sure you’ve properly defined your objectives and that you’re emotionally removed from the situation.
The amazing rise in value of XVG, a private currency that many people dismissed as a shitcoin, is a fantastic illustration of this phenomena. In a very short period of time (1-2 months), the cryptocurrency has surged by about 8000 percent, making a tiny number of believers extremely wealthy.
Of course, since the currency had no revenues and was overhyped, its price rapidly returned to its previous level.
Best practices for buying shitcoins
Before you acquire cryptocurrencies that are relatively unknown or disliked by the community, do extensive study to better grasp their short-term and long-term potential. Then, after you’re certain that the price of a specific coin will climb, begin by investing a little amount of money.
Observe the market for a while to see whether your first guess was right. Otherwise, you will be forced to make a tough decision: sell your coins and incur a tiny loss, or hold them and wait for a probable price increase.
If the price begins to increase, it is best to take gains or at least your original investment and continue to follow the upswing. In contrast, if you are completely aware of the hazards, you may invest more money when a clear indication signals a purchasing opportunity.
Finally, as previously said, remember to constantly maintain emotional control. Because of their cheap price, small cap coins are sometimes seen as opportunities. So many individuals set unreasonable goals and end up losing much more than they spend.