Altcoins like safemoon and dogecoin aren't going to the moon and you could lose all your money, analysts say
- Altcoins like
safemoonand dogecoinserve little purpose and are highly risky, analysts said.
- Safemoon bills itself as a decentralized finance token that is set to skyrocket in price.
Investors should be very wary of alternative cryptocurrencies such as safemoon and dogecoin, many of which are unregulated, highly volatile and could cause buyers to lose all their money, analysts have said.The breakneck rally in various altcoins has drawn in an army of retail investors, who are hunting for the next
Both dogecoin and safemoon have cooled since touching all-time highs earlier in April, with trading volumes down sharply. A plan by dogecoin supporters to send the token soaring even higher recently faltered.Regulators stress that anyone investing in cryptocurrencies is taking a risk and should be prepared to lose all their money, given that given that the digital assets do not have inherent value like stocks or the uses of the dollar or gold.
But analysts say buyers might want to be more cautious with some cryptocurrencies than others.Whereas bitcoin has drawn in big institutions and its market value is more than $1 trillion, relatively little is known about many altcoins that have been soaring in price. The creators of safemoon bill it as a decentralized finance token that is destined to rocket in price. A key part of its design is that it penalizes people for selling with a 10% charge, half of which is distributed back to holders and half of which is burned, according to its website.
Edward Moya, senior market analyst at currency platform Oanda, said: "Many view it as a pump-and-dump coin. Safemoon's initial buzz started off as many anticipated it will have a similar rise like dogecoin. It seems unlikely safemoon will ever make it to the moon."
Streeter said the token's set-up "sound[s] fresh alarm bells." She said "its model appears to be geared towards helping early holders of the currency get rich, as others pile in after them, pushing the price up further."She added: "Traders buying in late with expectation of celestial rewards are likely to be sorely disappointed when the price falls back to earth with a bump."
Safemoon's creators did not respond to requests for comment.
Bobby Ong, the co-founder of crypto analytics platform CoinGecko, said the problem with most altcoins is that they do not have any use cases.He argued that bitcoin is gaining weight as a form of digital gold, which people can use to hedge against inflation, although Goldman Sachs has questioned this argument. And he says
But Ong added: "To say that all 6,000 altcoins are useless is unfair." He said he is broadly supportive of tokens that are part of the decentralized finance movement, which aims to use blockchain technology to create safe financial contracts without the need for central parties like banks. Ong cited uniswap and aave as two examples.Moya said coins like solana were becoming more popular as people try to find competitors to the Ethereum network. "Solana's meteoric rise is based off the belief its high performance is so much faster than Ethereum, it could become the
However, even tokens or coins that have more obvious purposes are liable to fail. According to the Coinopsy website, close to 2,000 cryptocurrencies have failed in the past.Streeter said: "Volatility is the name of the game in the crypto world, with coins on a rollercoaster ride from week to week, and predicting the point at which demand subsides and prices begin to fall is very difficult, if not impossible."
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