In simple terms, shitcoins are digital assets with no use case or purpose. The term is used to refer to meme tokens or cryptocurrencies with no obvious function but just existing in the crypto market.
To put this into perspective, the creation of coins like Bitcoin and Ethereum came with some set-out goals/objectives and clear-cut use cases and these are the reasons why they amass so much value.
But, shitcoins are the direct opposite, they were created without a thought-out motive or as copycats. Some of the most popular shitcoins in the market today are Dogecoin, Shiba Inu, SafeMoon, Apecoin and others.
Most shitcoins are also used to carry out scam activities which are described as pump and dump schemes.
The Pump and Dump Scheme is a false narrative about a token to boost sales over a short time. And the information is controlled by the developers or influencers of the project to drive traders.
The modus operandi of most pump and dump schemes is that developers have massive stakes and would sell as soon as they gain enough. After this happens, the token price goes back to the ground and causes other innocent investors to lose a massive part of their investments.
How do you identify shitcoins
These tokens have the same pattern they follow. As such, traders can pick them out immediately after they float in the market. Shitcoins usually have mysterious/anonymous developers.
Crypto projects with utilities usually have verifiable developers or teams open to questions and enquiries, but shitcoins developers are always anonymous or hide under pseudonymous names and tags.
Another way to identify shitcoins is that they have zero functionality or utility. Shitcoins have no novel quality or intention to solve any problem in the ecosystem.
Many shitcoin projects copy the roadmap of other pre-existing projects across the crypto market. Some even go as far as promising milestones that they cannot achieve in the nearest future.
Should you invest in shitcoins?
Investing in shitcoins is really exciting. It can be insanely profitable, as these coins can go 10x in a matter of a few hours. On the other hand, it is one of the fastest and surest ways to be rekt if it goes sideways.
Last year, we saw a meteoric rise of shitcoins like Shiba Inu, Dogecoin, Fegtoken and SafeMoon. Shiba Inu increased tenfolds when the boom came in October 2021. Those tokens brought crazy returns for their early investors but most of them are now close to dead and forgotten.
According to data from CoinGecko, Shiba Inu is 70% down from its ATH, SafeMoon 94%, Feg token 96% from its ATH on May 13,2021 and Elon Musk’s influence can still not save Dogecoin from a free fall from its ATH of $0.74 on May 8, 2021 – 82% decline.
The bottom line is that shitcoins are extremely risky. They can go 10x in five hours, only to crash with 90% in the next five minutes. An investor can only get lucky when he sells his assets before a potential massive drop in price.
For this reason, it is generally a bad idea to have a significant portion of one’s portfolio invested in them. It is better to invest and trade cryptocurrencies with real life utility and purpose but shitcoins are needed sometimes to spice things up.