Bitcoin founder Satoshi Nakamoto remains anonymous to this day. All of that mystery built up Bitcoin’s early mythology and fueled the rise of cryptocurrency through the 2010s — but just because it worked for the creator doesn’t mean it will work for your digital wallet.
Sometimes, people who launch new cryptocurrencies choose to remain anonymous, which means you can’t research them, their development team or their past projects.
The danger of investing in coins with shadow leaders was illustrated in 2021 by Squid Game, a scam coin purporting to be based on the wildly popular Netflix series of the same name. According to Gizmodo, the meme coin jumped by 83,000% to $2,861 in just a few days. It quickly crashed to $0 once buyers realized they couldn’t sell or trade it on any exchange. The scammers made off with more than $3 million.
An Amateurish and Untrustworthy Online Presence
While credible mainstream publications like Fortune, the BBC and CNBC were publishing irresponsible and uncritical stories about the rise of the Squid Game coin, Gizmodo ran this unambiguous headline: “New Squid Game Cryptocurrency Launches as Obvious Scam.”
Something just didn’t look right.
Its Telegram channel was closed to outside comments. Its Twitter account didn’t allow the public to reply to posts. The email address listed on the 3-week-old website didn’t respond to inquiries. The website itself — as well as the whitepaper posted to it — was littered with misspellings and grammatical errors.
Like the Nigerian email scams of old, all the signs were there, but the prospect of 83,000% gains made them invisible.
Celebrity Endorsements and Pop Culture Bandwagons
The crypto crash has put a huge bull’s-eye on Matt Damon’s back. The Oscar-winning actor helped bring crypto into the mainstream when his now-infamous “Fortune Favors the Brave” commercial aired during the Super Bowl — but many investors who bought into the celebrity hype now feel duped.
If you had invested $1,000 in Bitcoin when the ad first hit YouTube on Oct. 28, 2021, $375 is all that would have remained by mid-June 2022.
Damon, of course, didn’t cause the crash; but, according to Newsweek, he’s one in a long line of celebrities whose endorsements alone caused cryptocurrencies to artificially inflate. Because crypto trades at such a comparatively low volume, a single word, tweet or hashtag from the likes of Kim Kardashian, Larry David, Elon Musk, Jake Paul, Snoop Dogg or Paris Hilton can puff up a coin’s value into a very burstable bubble.
It Isn’t Listed on the Big Exchanges
The Squid Game jig was up when “investors” — aka marks — realized that the hottest new coin was a one-way street. Once you bought the cryptocurrency, you could never turn it back into real money again because it wasn’t listed for trading on any exchange.
Coinbase and the other big, credible exchanges have strict criteria for listing digital assets. If some preliminary searching reveals that a coin you’re considering is hard to buy on the exchanges you normally use, proceed with caution.