Identifying Shitcoins: Their Characteristics and Real World Examples in 2021
There are some coins and tokens out there that have no investment potential for various reasons. They can be part of a scheme to fleece investors, or they can simply be a coin or token that did not take off for whatever reason. They are called “shitcoins.” This info article provides you with all the information you need to discern which coins are shitcoins.
How to Spot a Shitcoin
There is no sure way to spot a shitcoin, but there are some indicators investors should look out for.
That much is obvious, but it is important for novice investors to understand that established coins and tokens like Bitcoin, Ethereum, and Litecoin are legitimate investments and can be used safely.
Important Details Are Missing
Legitimate cryptocurrencies have a whitepaper, information about the developers, and other key details investors want to know. A coin or token lacking this information is not worth investing in. Also, if it is poorly written, or looks like it has been plagiarized, avoid it.
No Defined Purpose
Bitcoin, Ethereum, and other well-established cryptocurrencies and tokens have a purpose. Bitcoin is a decentralized payment system, Ethereum is for validating transactions and securing networks, and Monero is for users who want their commercial privacy respected. If a coin has no apparent purpose, do not invest in it.
Similar Price History
Most shitcoins follow a regular pattern: the coins are issued, the value spikes, and then it crashes and never recovers. This is caused by people engaged in a “pump and dump” scheme, which is an attempt by investors to artificially inflate a coin’s value before selling it off.
Low Market Cap
Market capitalization is the value of an issuer’s outstanding coins. Coins with low market capitalization are highly vulnerable to “pump and dump” schemes. Avoid coins with a low market cap.
Some coin issuers will offer the first wave of buyers a discount on coins to spark a “buying frenzy,” allowing those who hold a significant number of coins to sell them later on for a high profit.
Examples of Shitcoins
There are several examples of shitcoins. Not all of them may meet all of the aforementioned criteria, but some of their aspects make them questionable.
Doge has no apparent use, and it largely depends on public relations boosts to pump up its value, making it reasonable to assume Elon Musk is engaged in speculation. Nevertheless, it has managed to maintain its value since the beginning of 2021.
Shiba Inu has no blockchain, nor does it appear to have usage whatsoever. The maximum supply is one quadrillion, and they have little to no value.
Tron was created by Justin Sun and his development team. Their goal was to create a decentralized alternative to legacy social media sites where creators could share their intellectual property with fans. Early on, Tron rose to 22 cents, only to crash soon after. Also, judging by its price history, consumers have not caught on to the idea.
Tron is an example that shows not all shitcoins are nefarious plots to steal people’s money. It was simply an idea that did not take off. Even the founder of the project Justin Sun once called TRX a shitcoin, which, apparently, didn’t do the project any good.
Are Shitcoins All That Bad?
Anything can be or become a medium of exchange, even a shitcoin. An event that causes people to believe that some coin will rise in value is all that is needed. A perfect illustration of this principle in action is how coins and tokens all across the board grow in the wake of the Covid-19 pandemic and the economic uncertainty that followed.
Dogecoin is a more specific example of this happening. Its developers admitted that they created it as a joke, but it still rose in value and remains higher than it did before its meteoric rise in February 2021. Yes, it got a public relations boost from people like Elon Musk, but that doesn’t negate the fact it was a shitcoin that rose in value and managed to stay there.
However, it remains to be seen how long it will hold its value. As mentioned, one of the reasons it rose in value is that Elon Musk started tweeting about it and could be overvalued as a result. If he stops doing this, it is reasonable to assume it could fall in value.
Readers should come away from this article knowing that coins and tokens with the characteristics mentioned above should be avoided. However, circumstances could change that could cause some of these coins to become legitimate investments. That’s why investors should stay on top of economic news and current events related to cryptocurrency and blockchain.