Editor’s note: Cryptocurrencies have suffered a 50% downturn in just over a month. Some are calling for the end of the crypto bull market.
But veteran investors know big pullbacks are common in the space. They see this as potentially the last good buying opportunity before the next run higher.
So today, we’re sharing this essay from Near Future Report editor Jeff Brown, offering three key guidelines for anyone looking to enter this market…
I saw them at every cryptocurrency conference I attended…
They had booths… presentations… a flashy website… the company reps even seemed like nice enough guys.
But I took one look at the digital token they were promoting and knew it was a fraud.
The company I’m referring to is BitConnect. The digital token associated with the company trades under the crypto ticker BCC.
BitConnect marketed itself as a cryptocurrency exchange and lending platform.
BCC enjoyed some stellar returns in 2017. Last year, it shot up more than 280,000%.
Impressive returns… but I didn’t recommend it to my readers.
In fact, in November 2017, I explicitly recommended that my readers NEVER buy BitConnect.
You see, BitConnect would invite people to trade their bitcoins for BitConnect coins. The company would then turn around and lend the bitcoins out with the investors collecting interest.
When digging deeper into the frequently asked questions on the website, I discovered information concerning the “BitConnect Investment Opportunity.” Here you can read: “The moment you acquire BitConnect Coin, it becomes an interest-bearing asset with up to 120% return per year through PoS [Proof of Stake] minting.”
I told my readers in November, “This is the equivalent of a Ponzi scheme, short and simple.”
I’m happy I warned readers to steer clear. Because just last month, it happened: The bottom fell out.
Take a look at the updated chart below.
On January 15, BCC was trading around $300. By the next day, it had plummeted to around $19. That’s a 94% hit. And as I write this, it is trading for a mere $2.19.
From its peak of $2.8 billion, the BitConnect market cap sank to $20 million, erasing over $2.7 billion in wealth.
Anyone who was holding a large amount of BCC has been completely wiped out. To have made money off of this Ponzi scheme, an investor would have needed ridiculously good timing within just a six-month window.
At writing, there are four lawsuits pending against BitConnect. The company’s assets have been frozen.
How to Spot a Crypto Scam
Amidst all of the incredible investment opportunities in cryptocurrencies, blockchain companies, and ICOs (initial coin offerings), there are certainly ones to completely avoid as well.
Just like the dot-com bubble of the late ‘90s, there is fraudulent behavior. Some of these scammers are hoping to take advantage of the hype in the industry.
Here are a few things to look out for to make sure you don’t get caught up in a crypto scam.
Red Flag #1: Who Is Backing the Project?
Before you invest in any cryptocurrency, find out who’s behind the project. Do they have any experience with blockchain technology and cryptocurrencies or digital assets? Are there any reputable advisors on the team?
Here’s an example…
Recently, a company called “AriseBank” hosted an ICO. AriseBank marketed itself as “the world’s first digital asset bank.” It is reported that their ICO raised $600 million.
But a simple Google search would have revealed that the CEO, Jared Rice, is a well-known fraudster. That’s an obvious red flag for me. I always review the backgrounds of key executives and advisors as a key step in analyzing any opportunity.
Red Flag #2: Beware of Celebrity Promoters
While not fraudulent or illegal, using a celebrity’s reputation to promote an investment opportunity is also a huge red flag for me.
In the case of AriseBank, former world champion boxer Evander Holyfield was associated with AriseBank and was supportive of the ICO. Anytime I see a celebrity endorsement, particularly those coming from individuals that have no understanding of the technology and business, it is an immediate indication that something isn’t quite right.
The best blockchain projects would never associate with a celebrity. They just don’t need to pursue those kinds of marketing tactics… the project’s merit speaks for itself.
Red Flag #3: Does the Project Have Community Backing?
A successful blockchain company isn’t created in a vacuum. It requires communication, cooperation, and participation with developers and the cryptocurrency community at large.
To use AriseBank as an example once more, there was no community built around the project. I couldn’t find any teams in the community that were working on its technology or partnerships. To make matters worse, there were no regulatory filings associated with the company. And this is a financial institution claiming to have acquired a 100-year-old bank… There must be filings.
As you may have guessed, AriseBank is precisely the type of investment I would recommend you avoid at all costs.
And it will come as no surprise to learn that the Securities and Exchange Commission (SEC) has frozen the company’s cryptocurrency assets and considers the ICO a fraud.
Anybody who took place in the ICO without doing due diligence has lost all of their investment…
A Valuable Lesson
BitConnect and AriseBank provide a valuable lesson.
When investing in cryptocurrencies, digital tokens, and initial coin offerings, it’s essential that investors perform due diligence to eliminate the risk of investing in projects with the potential for outright fraud like BitConnect and AriseBank.
Without doing so, investors are just gambling… almost asking to lose all of their money.
Yet by performing the necessary analysis, and looking out for red flags, investors can ensure that their investments are educated speculations in solid projects that have the potential for huge returns.
Regards,
Jeff Brown
Editor, The Near Future Report
P.S. Smart investors have the potential to make 21 times their money with cryptocurrency-related companies in the next few years. But as you’ve seen, investing blindly can be dangerous.
That’s why I’ve made it my mission to help my readers profit securely from the cryptocurrency market while avoiding landmines like the companies above. Read on here.