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How to identify scams and rug pulls in cryptocurrency


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How to identify scams and rug pulls in cryptocurrency
Description:
  This is not by any means a comprehensive list of checks to avoid the challenges in the cryptocurrency space but it is in my honest opinion a very good start to doing some of your own due diligence and avoiding some potential losses. I think a great approach to risk management in trading  is to simply size in by maybe even if you are interested in an opportunity start with a small percentage of what you may have been thinking of contributing to a project and adding more at your discretion at a later date when the project is more proven to you personally.

1. Youtube checks : Beware a new channel 3 months or less of content by either platform or promoters of the platform.
B: Youtuber that is a serial scam promoter. 6 months to 1 year plus of failed projects promoted
by this creator ( mostly Shitcoins down 95% or more from all time high currently, Dapps & other platforms folded or disappeared in 30 days or less ).
C: flashy lifestyle vlogs traveling & or showing most likely rented cars or Homes.
D: NEVER be influenced by the quoted size of a youtubers contributions to any project. This
can be a costly trick to influence you to contribute more.
E: NEVER be influenced by a back office showing overnight success by promoters of any project
as this data can be manipulated & lead you to thinking the project is secured with more capital & interest than may be actually there.


2.
Only Telegram chat support
Note: Encrypted anonymous chat programs where you can not decrypt content to use it
in a legal setting. Some people want privacy and I understand that but it can also be a
breeding ground infested with criminals using it like Plato's ring of Gyges.

3A. No website or
Website expires in less than 4 years
B. Website registered privately
C: Website not a .com
D: Website using similar or identical scripting to a recent failed opportunity
so called forks aka Free copies of another popular idea.

4.
Fake CEO either actor or fake name: Anonymous owner IMO is better than fake
because privacy I can understand but fake trust building is a none starter.

5. No documented trades: actual historical trading data and preferably forward
positioning and trade ideas.
NOTES: When I say forward positioning I mean documented calls on 3rd party
platforms like Twitter or tradingview etc while the entry is still available not just
after the idea is in profit already.
Examples:
https://twitter.com/TraderAlfred/status/1524434251416014850/photo/1
https://twitter.com/TraderAlfred/status/1473499418645118986/photo/1

6. Using hot buzzwords: Metaverse, NFT, Yeildfarming or mentioning of leveraged trading.
While these topics are very popular right now unfortunately they do not have a proven
track record of being profitable or are on the outer extreme spectrum of speculation.

7. Showing Financial licenses to build confidence: A recent popular trait of these financial
opportunities is to acquire licenses in various jurisdictions to build confidence in their
legitimacy. The license alone is not a bad indicator but especially when it is coupled with
behavior that is strictly prohibited by said license it is a red flag. An Example would be
an A.S.I.C.  license from Australia but soliciting potential investors in unsupported
jurisdictions like the USA and Canada ( both countries have strict protocols requiring
entities to be licensed locally to offer financial products to citizens here )

8. Compensation plan structure: While there is nothing wrong with a company offering
a compensation plan there are structures that are simply not sound mathematically.
An average person referring people to a structure will only be able to see people in
the first 3 levels statistically. This means opportunities with 7 - 9 levels of compensation
inherently will benefit mostly those closer to the top as almost everyone in the structure
will fall under them. Regardless of a smart contract or centralized database this presents
a backdoor for a small few to exit with a majority of the liquid crypto once the organization
is built to a level of maturity.

     Also paying front loaded compensation of 14% or more before any investing of the
funds has taken place is a bad sign as well. Most fund managers work on a 2% maintenance
fee ( regardless of performance ) and 20% of net profits structure. It is certainly a red flag when
there are compensations of 7x or more and they are based not on performance but paid to
promoters in advance of any profitable activity at all.

 

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