I watched "All or Nothing" with my family last night.
The plot in the film actually made my family, who had worked hard to educate people about the cryptocurrency world for 5 years, start to suspect that digital currency is a scam.
Worriedly asked: Should we withdraw the money?
This game is a high-end blackmail against the cryptocurrency world.
But to be honest, today I want to tell you how to avoid the traps of “cryptocurrency scammers”.
There are many projects in the cryptocurrency circle that have nothing, and their valuations are only tens of billions of US dollars, and they all treat retail investors as idiots.
For projects with high valuations, these institutions and project owners are just like telecom fraudsters, they are all fraudsters and should all be arrested.
Because they treat retail investors as fools and bag holders, not even giving them a chance to get a share of the profits, and instead making them lose all their money.
Retail investors who get the money for free should not be protective of their investors. At most, they will give you some sweet treats in order to get you to take on more shares.
For example, the recently listed WLD, calculated based on the coin price of $2 on August 2, as soon as it came out, FDV exceeded the market value of Dogecoin by $10.4 billion, reaching $20 billion.
Although the project team took a shortcut, the initial maximum circulating supply was 143 million coins, and the initial circulating market value was only US$286 million.
Many people bet on its rise in the short term.
Because the market capitalization is small, it is easy to pull the stock price.
Some people also say that the cost of institutional financing is high, around $1 (I don’t know where this number comes from), and the current coin price is undervalued.
But the market maker is much smarter than retail investors, and it knows all the details.
Its cost is low enough, especially for the project party, it is simply money out of thin air.
Of course, sell it quickly for $2.
(Little knowledge: The financing cost of star project institutions is generally less than 10 times the opening price. This is the unspoken rule of the industry)
There are too many such overvalued fraud projects.
For example, ICP, ALGO, EOS, etc. that we often talk about.
Let’s take ICP as another example, because it is so classic.
When it first came out in May 2021, the unit price was around $500, and the FDV was around $250 billion, close to the market value of Ethereum at the time of $270 billion. It peaked at its debut, and the current price is around $4, a drop of 99%.
CZ also once said that he does not like such highly valued projects.
He listed the dangers of overvalued projects: Overvalued projects are not a good thing. Once the project tokens enter the exchange, they will bring various dangers.
1. Overvaluation is bound to experience the pain of value return, and early price declines are likely to cause FUD.
Suppose your project is valued at $200 million, and you sold 50% of it at $100 million in the ICO. One day you trade on Binance, regardless of hype and market overreaction, unless you increase the value of the project on the same day (such as breakthrough progress, profitability, etc.), the token will not continue to rise after listing on the exchange.
If the token cannot rise, it will fall. In particular, short-term traders who hold a certain number of tokens will sell their tokens to pursue projects with higher short-term returns. The selling of short-term traders will cause retail investors to follow suit, resulting in greater selling pressure and further price declines.
The price drop will make people start to criticize the project, saying that the project is a scam. Suddenly, the project becomes useless, with empty promises, disharmony in the team, and improper market value management. There are criticisms of the project on Bluebird and YouTube.
Negative news is very unfavorable for a newly launched project. It not only affects the normal operation of the project, but also affects the recruitment and construction of the project. Employees will also blame each other. You also have to take on the task of increasing the project valuation from 200 million yuan to 400 million yuan in a short period of time, which is extremely difficult in the short term.
2. The team lies down and has young models in the club every day.
After the project party obtains a large amount of financing, they will lose their sense of hunger. The team with huge financing may lose the passion and motivation in the early stage of entrepreneurship. They get rich by relying on PPT before the project is officially built. Anyone who still works seriously would have become a young model in the club long ago.
Just do a good job of soft operation, post on Twitter, open AMM, and show that the team is working.
3. Without institutional buyers, the high valuation becomes a low valuation.
For projects with high valuations, financing is a one-time deal from the beginning. This is because there is no room for improvement in the valuation of the project. When the project needs to raise funds again, especially in the crypto winter, the valuation of the project has to be further reduced, which is a fatal blow to early projects. Because the reduction in valuation often means that the token price is artificially high, and what awaits is a further decline and a death spiral.
How do we avoid such doomed projects? I think there are three typical characteristics:
1. The project entered the top ten in the web3 market value ranking as soon as it was launched (note that this refers to the market value ranking, not the FDV ranking).
2. The vision is grand, like a castle in the air, which is a typical feature of all high-valuation PPT projects. High-valuation projects like to draw big pictures, such as ICP's so-called creation of a world computer, subverting the Internet, and even looking down on Ethereum. For example, WLD claims to create an open source protocol for global financial fairness and inclusiveness.
These visions are all flashy and difficult to achieve.
3. Everyone knows about it, and the funds for entering the market are exhausted. The early publicity and hype were unprecedented, and the project was well-known even though it had nothing. With the support of the star team, top institutions, and grand vision, everyone thought it was great and valuable. However, the hottest ones will die, and everyone knows that there will be no retail investors to take over in the future, and there will only be selling pressure, and the funds for entering the market will be exhausted.
So don’t be superstitious about star teams and invest in highly valued projects.
Overvalued projects are more like scam projects jointly undertaken by institutions and project parties. It is a high-level project whose purpose is to make money together.
