How to DYOR and stay away from Ponzi schemes?
When it comes to investing in cryptocurrencies, there’s a lot of information on the internet, and it can be tough to know what’s true and what’s not. It can take time to tell the difference between a legitimate investment opportunity and a Ponzi scheme. So how can you ensure you’re doing your research (DYOR) and avoiding scams? Here are a few tips.
What is a Ponzi scheme, and how do they work?
You might already know what a Ponzi scheme is. That way, it is easier to spot one. But let’s touch upon it again here.
A Ponzi scheme is an investment plan in which existing investors are paid using funds from new investors. Organizers of Ponzi schemes frequently claim to invest their money and earn huge returns with little or no risk. However, the fraudsters in many Ponzi schemes do not invest the money. Instead, they use the money to repay people who had previously invested and may keep it for themselves.
Trivia: Ponzi schemes are named after Charles Ponzi, who defrauded investors with a postage stamp speculating scam in the 1920s.
The tell-tale signs of a Ponzi scheme
Attackers, scam artists, and fraudsters frequently prey on vulnerable people who succumb to FOMO (fear of missing out) by luring them with ostensibly appealing schemes. Below are some red flags to watch out for before investing in crypto. While this can be a separate post, let’s discuss them quickly below:
- There is no whitepaper.
- A sloppy website and a disorganized whitepaper
- The absence of a road map
- The background of the team is unknown.
- There are no specified target audiences.
- There are no clearly stated use cases.
- Too much hype and inadequate material
- Outsourced developers
- Ineffective tokenomics
- Inappropriate social media behaviour
How to DYOR in crypto?
You should conduct your research before investing in any cryptocurrency project -DYOR. You’ve heard it before, and you will hear it again. But what exactly does ‘doing your own research entail? Where do you even begin? Which sources do you believe? Here’s how you can DYOR and be investment ready.
Coin Market Cap & Coin Gecko
One of the best things to do is visit a website like CoinMarketCap or Coingecko to obtain an initial view of the project. These websites are reliable and will tell you right away what sort of investment you have on your hands. Check the market cap if it is a low, small, or mid-cap investment, and make sure there has been recent trading volume.
Investigating Social Media Platforms
Crypto information is incredibly time-sensitive, and social media is frequently an excellent place to begin, particularly for newcomers. Twitter, Facebook, Telegram, Reddit, Youtube, and Discord are some platforms where you can get the most recent updates and authentic information about a crypto project.
Crypto news sources
Established news sites are an excellent place to examine to see if your potential investment choices have made headlines. Coin Desk, Coin Telegraph, Bitcoin Magazine, Inside Crypto, Crypto is Coming, and Crypto-News.net are among the most trustworthy news publications.
The official website, and the white paper
The best place to get all the information you need about a project is its website. Reading a project whitepaper, if available, is also strongly recommended. The whitepaper will answer all possible questions about a project.
Finally, it’s essential to be vigilant and do your research when you’re trading cryptocurrency. And now that you are well equipped with insights into cryptocurrencies, NeoFi is a great place to start your crypto journey — we have various resources to help you trade, and our platform is user-friendly and intuitive.
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