Penny Stocks and Crypto Shitcoins! HODL or SODL?
If you’ve seen this movie, the wolf of Wall Street, you should already be familiar with the term pink sheet or penny stock, but if you are not and you are going to invest in the crypto market, this may be already too late!
In the cryptocurrency market there are big and respectable names like Bitcoin and Ethereum, a lot of other altcoins such as Litecoin and Monero that can be compared with the blue-chips and there are other shady coins that come and go really fast and are known as the shitcoins! Something similar to the pink sheets!
Well, not all pink sheets are scams and also not all altcoins are shitcoins, but there are people arguing that no matter what they truly are, they can work like an elevator, you just jump in, wait for it to reach the moon and jump out at the right time which is something that is not going to always happen!
If you are an investor and relatively new to the cryptocurrency space, I highly recommend you continue reading this article to invest more wisely in this space!
So, let’s review the terms, first.
What Are Pink Sheets or the Penny Stocks?
Pink sheet listings are companies that are not listed on a major exchange like the New York Stock Exchange or Nasdaq and are often traded over the counter. The name came as the stock quotes are circulated using pink-colored sheets. The majority of stocks sold over-the-counter are low-priced penny stocks, meaning that they trade for less than five dollars per share. However, there are a large number of companies not considered penny stocks that prefer to sell their shares through the over-the-counter network to keep share distribution activity inexpensive.
The Wolf of Wall Street movie is about pink sheets and actually based on a book written by the real Jordan Belfort, who is the main character of this movie. If you are interested to learn more about the pink sheets, I strongly recommend watching that movie.
What Is a Shitcoin?
The term shitcoin refers to a cryptocurrency altcoin with little to no value, or a digital currency that has no immediate, discernable purpose. The diminished value of a shitcoin is often due to failed investor interest, because it was not created in good faith or because its price was based on speculation. As such, these currencies are considered to be bad investments.
Penny cryptocurrencies are sort of pink sheet stocks. But you know, the pink sheets are not illegal either. So, like pink sheets stocks, not all penny cryptocurrencies are scams. There are good ones, but they need to be handpicked with enough knowledge, experience and risk management strategies.
Should you buy Penny Cryptocurrencies?
That depends. Even picking one penny cryptocurrency might change your financial life forever in a good or bad way. At the time of creating this video, based on data from Coingecko website, there are almost 6K coins in the market! So, it’s not that hard to find a bunch of penny cryptocurrencies. As you can expect, most of these coins will not be valuable in a few years and a handful of them will become successful projects.
Some people may argue that even if 80% of your investment fail, the rest of them may get you rich, but with the whopping and already growing list of crypto coins, this strategy requires a shit load of money!
Why are people actively looking for this shitcoins?
Well you may be surprised that some people even search for the term “best shitcoins” and there are even some “shitcoin clubs” on the internet! I find it very awkward to type the words “best” and “shit” together!
But, why exactly?!
Well for various reasons, but the main ones are greed and lack of knowledge. There are other reasons for sure, but these two factors can affect them too.
Greed!
Some people are actively looking for the next bitcoin or the rocket ship to the moon, because they feel that they missed out on the crypto boom. They see the BTC prices and how it went from cents to thousands of dollar and feel that they have missed that train. When they look further down the list, there are new coins in the market and they resemble new opportunities! They are priced less than a dollar and in some cases even less than a cent! With a hundred box, they can buy a shitload of these cheap coins. They just imagine a future in which these coins become another bitcoin and they will become super rich and millionaires!
But with a great reward comes a great risk! You have to learn your lesson! If you’re lucky, you learn those lessons and wind up a savvy trader who trades well whether the market is up or down. But the odds are against you. Human nature is against you. Emotions are against you. Everything is against you.
And yet there is hope!
Lack of Knowledge
The price to becoming a good trader is really, really high. In the world of investing, nothing can beat the knowledge you gain about an asset from your personal research. And, in fact, it is much needed.
Blockchain is a complicated and technical matter. There are a lot of pieces involved and you should at least have some basic knowledge, like the meaning of circulating supply, the market cap and how the prices of these coins are engineered! You should know if they are mineable or pre-mined. Can new coins be minted in the future?
When you want to invest in a new coin, check sites like Coingecko or Coinmarketcap to see some stats and rankings. The maximum supply of a coin is something that developers decide in the early days of development and prior to release. The circulating supply can be less than that and most of the times it is.
Every precious asset or metals like gold have a limited supply and that’s what makes the valuable. The same philosophy applies to cryptocurrencies as well. In the case of cryptos, the founders determine the max supply, instead of nature! Bitcoin has a max supply of 21 million coins. If there will be another coin as successful as bitcoin, but with 10 times more supply, the price will be 10 times lower!
In some cases, the developers decide to release only a limited amount of coins, but you have to keep in mind that the most important factor will always be the market cap. [market cap = price*circulating supply]
Coins with a limited supply have a wild price fluctuation. The opposite is true for coins with a massive supply of coins. The prices move relatively slower than a coin that is having a similar price and less total supply limit.
When you open the coin info page on Coingecko, you can see the price chart which you can zoom out to see how the coin has performed in the past. You also have access to important links like the homepage of the coin to read more about it.
Bitcoin was created to be a peer-to-peer electronic payment system that requires trusting no third-party. Ethereum platform was created on the belief that a Blockchain can do much more than just cryptocurrencies. That’s why they introduced smart contracts and bunch of other cool features.
So, what is the purpose of a particular cryptocurrency that you are interested in?
Does it solve a real-world problem? If not, forget about it, and move on to the next one. Note that, the same problem would have different solutions. Likewise, a number of penny cryptocurrencies might be trying to solve the same problem in different ways. You have to weigh which one is better.
Unfortunately, most of shitcoins just copy other coins and with open-source codes on GitHub repositories, it’s simpler than ever to fork a coin. But a wise investor always checks the GitHub repos to see how much development is happening. You can see the contributors, the stars it received, the open issues and more.
Pumps and Dumps
Artificially increasing the price of an asset and then selling to make profits is known as “Pump and Dump”. Doing so is illegal in traditional stock markets like NYSE and Nasdaq, but it was part of those exchanges in the early days.
As there is no proper regulation around penny cryptocurrencies, and as they’re growing like mushrooms day by day, a lot of pump and dump schemes happen. Moreover, it is easy to manipulate penny cryptocurrencies as their price is very low.
Sometimes the crypto whales, who is a trader with huge assets and market influence, takes part in the pump and dump schemes by moving a big chunk of his assets. Hopefully, there are robots monitoring the publicly available Blockchain data and you can read about them in the crypto news websites and sub-reddits.
When the price of a penny cryptocurrency shoots up suddenly, it is better to stay away, as it might signal a probable Pump and Dump scheme. Also, beware of unsolicited offers about the information on Pump and Dump opportunities. Chances are that you’re about to pay the price for someone else’s profits.
If you invest in a coin that has reached the rock bottom after a massive surge in the price, chances are high that it would never recover. And, investing in them would just be a waste of money.
So, analyze carefully why a coin fell to rock bottom. If you see several reasons that the coin might rise again, then buying would be a good option.
How can you identify shitcoins?
Shitcoins are the cryptocurrencies that are there to make money to the people who launched it. Simply put, shitcoins are made to make you miserable.
Here are some of signs to help you identify them:
• No proper official website. And, the site looks very basic and fundamental.
• A whitepaper is not available. Or, the one available is not professional.
• The whitepaper doesn’t explain the project, or can’t convince you what problem it is solving.
• The road-map for the project is too long to launch the product. Even if the product is launched, by that time, the crypto-market would have got better solutions.
• The team behind the project is not revealed and stays anonymous. Unless the team is designing a privacy-based coin, there is no reason to be in the shadows.
• Social media profiles for the company or the project are not available.
• The project is not marketed well. And, far fewer people know about the project.
• Search about the project in google, if you can’t find them on the first page, probably no one else will. And the project might never gain traction.
• They are not audited by known 3rd parties.
• They are a fork of another coin and they only difference is the name and logo.
As an example, right now there is a madness going on with some food named coins like Sushi, Kimchi and Yam. They are forking other projects and also each other and are being misused for yield farming.
What is the conclusion?
If you don’t want to lose a lot of money and most importantly your time, you have to become a good trader and for that you have to invest your time and money into learning new skills and gaining the required experience.
And don’t let your greed fool you!
You didn’t miss the boat and It’s not over. A mere 1% of people own crypto right now. Crypto can solve dozens of previously intractable problems, like digital identities, supply chain integrity, data breaches and many, many more.
But it’s going to take a while. The crypto superhighway is still under construction. They’re paving the roads and pouring the cement.
Some called the dotcom crash a bubble, which it almost was, but look at the companies born right out of that bubble, Google, Apple, Amazon. The internet looked like a joke to some people 20 years ago and here we are now.
Only believe the information from trustworthy sources. If something is too good to be true, you have to keep your senses clear before acting. Luring is a preferred strategy used by many scammers.
Emotionally being strong really helps you.
You need to figure out, when to sell and, when to buy. Also, you need to stay calm when the things don’t go your way.
How can you become a good crypto trader? That’s a good topic for another debate, but there are a lot of ways to gain insight of the market. Fundamental analysis, technical analysis and also on-chain analysis. But the most important ones, letting loose of your greed and relying on your knowledge and experience.
So, don’t put your money that you can’t afford to lose into penny cryptocurrencies.
