Where money is concerned, scams inevitably follow. And the same is true with cryptocurrency. Scam artists know no bounds, and people have constantly been scammed. That’s nothing new under the sun.
Recently, we have faced the FTX case, and its affiliated trading firm Alameda Research has been exposed. Sam Bankman-Fried clandestinely used customer funds to bail out FTX’s sister company, Alameda Research. The collapse of FTX is definitely already slumping as one of the most relentless crypto-related frauds in history.
2022 revealed that the FTX – Alameda Research case is not particular, unfortunately. That’s why it’s more important than ever for anyone in the crypto world to double-check their information before investing.
After arguably the most earth-shattering recent deception, we identified some crucial questions you always need to ask before getting involved in any crypto investment.
Let’s see!
Is there any legislation that might prevent the project from growing?
The base feature of the crypto market is the lack of regulations. It is the most libertarian economic model to date. However, the risk of fraud and infrastructure vulnerability shows up without regulations. Thus, some countries have created a set of laws or drafted rules to protect consumers.
So, before investing, do your research and check your area’s crypto regulations. Cryptocurrency regulations can differ from one state to another. After that, check for possible legal issues the project may have or has had.
Let’s look at the SEC vs. Ripple lawsuit: In December 2020, SEC sued Ripple for several allegations, including that the founders’ Brad Garlinghouse and Chris Larsen, sold XRP as unregistered security between 2013 and 2020 and that XRP is not a registered security. Even though Ripple may win the lawsuit, the SEC allegations halted the XRP’s growth.
The SEC vs. Ripple lawsuit reflects the perfect example of how legislation or legal issues prevent the project from growing.
Is the proposed goal attainable?
Every project has a proposed goal. While some projects seem futuristic, others focus on solving practical issues. Do your own research to understand how a project works and whether that project has an attainable or a SMART goal.
Sidenote. SMART is an acronym for Specific, Measurable, Achievable, Realistic, and Timely. Therefore, a SMART goal incorporates these criteria to help you understand where a project is heading.
If the goal seems unattainable, that may be a red flag for you, and you should steer clear of that project.
To give you an idea, the Celsius Network’s promise of ridiculously high yields should have already been a warning sign that things were too good to be true. And it did. Celsius Network announced bankruptcy on July 13, 2022, after more pieces of information showed that Celsius functioned like a Ponzi scheme.
However, a lot of projects have a tangible goal. Besides, to see if a particular goal is attainable, you can also compare that project to another cryptocurrency or token.
We must admit that investing in relatively unachievable projects is always risky, especially if you are new to crypto. This is the most important reason for doing your own research every time.
How does it compare to its competition?
As I mentioned above, check what competitors are still on the market. Today, we are facing a lot of new crypto projects, which do not come with anything different from competitors.
Cardano is aiming to become the “Ethereum Killer.” The match between Cardano and Ethereum will finally be judged by how successful will the proof-of-stake implementation be.
Just like Cardano, the FTX aimed to beat the Binance supremacy. However, we can see today just a bankrupt FTX, which will be remembered as one of the most relentless crypto-related frauds in history.
Does the crypto project invest in marketing?
A reliable crypto project must keep an eye on marketing trends.
There is no point in having a substantial crypto project if it doesn’t have a well-thought-out marketing strategy. But let’s get this straight, on the actual circumstances, a crypto marketing strategy cannot be perfect.
What you can do is see what marketing strategies the project seems to use and how active they are in this endeavor.
To help, two essential models that should underlie a marketing strategy in the crypto market can be:
Appeal to an Advertising Network Solution. Coinzilla has built an extensive network of cryptocurrency websites that generate over 1 billion monthly impressions from people familiar within the crypto industry.
Promote the project through NFT giveaways. Many people are hunting new NFT giveaways, and an NFT giveaway is something you should do.
Is the team experienced or reliable?
Last but not least, remember to investigate the team behind a project. The team is vital. The team of a crypto project can offer you a general idea of the in-house experience and consider checking if fake personas are created to gain public trust.
For example, suppose Vitalik Buterin, the founder of Ethereum, is willing to develop a new crypto project. In that case, it indicates that the team knows what they are doing and the people in it are experienced in the business.
If experienced veterans back the project, a profitable investment becomes possible.
