3 Red Flags That Your Shiny New Crypto is a Total Scam

Andrew Throuvalas
4 min readMay 21, 2021

The present optimism surrounding the crypto market must be tamed with an equal dose of skepticism.

If yesterday’s cataclysmic market crash is anything to go by, then we can surely say that investing in cryptocurrencies is a dangerous business.

Tens of thousands of leveraged investors lost everything they had betting on Bitcoin and Ethereum– the two coins with the largest market caps and track records of stellar performance– when both coins bottomed at less than 50% of the value of their previous highs.

So when investing anywhere else in the crypto market– especially in newer, cheaper, less established coins– one cannot overemphasize their use of caution. If not outright scams, most coins are simply unsound investments that will be tossed into the dustbin of history by this time next year. Here are 3 simple-but-crucial warning signs that a cryptocurrency isn’t worth you risking life and limb over.


This one may seem rather obvious to the rational person– but people looking to get rich quick on cryptocurrency aren’t always thinking rationally, so this point must be reiterated.

When people see new crypto that is low in value, this often has a psychological effect on them whereby they think that it has massive upside and little downside. But a low price per unit does not necessarily translate to scalability. If the crypto is still worth dirt, then in all likelihood it will stay that way, along with 99% of others have in previous bull cycles. Do you remember “Quark”? Yeah, neither do I.

Furthermore, even if the crypto has achieved a high value and a top 50 market cap, make sure that the coin has maintained that status for at least a couple of months before even giving it a second look. A lot of coins rise in value purely out of luck and surrounding hype during a crypto bull run, but inevitably lose all value again once the market experiences a shock. Easy come; easy go.


Never invest in something that you don’t understand. Few people even understand the underlying blockchain technology that underpins most cryptocurrencies, never mind what may make his crypto of choice particularly special.

The excitement around decentralized, digital exchange this year parallels the excitement around the internet in the early 2000s. Though the technology went on to be world-changing, with its emergence came the great dot-com bubble, when countless businesses without a clear or specific use for their fancy new website still managed to garner people’s trust– and money– simply because they had “dot com” written at the end of their names.

Likewise, even if your crypto is high in value– and has maintained such value for some time– you must make sure to identify the problem that your cryptocurrency is attempting to solve. This will give it some basis for its value. If everyone is invested only because they trust that everyone else is also invested, then your crypto is a bubble. A certain meme-coin with a funny dog on the face of it would fall into this category… but that’s just my opinion.

Know its mission statement. Know its governance. Have a basic understanding of its protocol.

As the Bitcoiners say: “Don’t Trust. Verify.”


This is the sign of more than a valueless coin, but a malicious Ponzi scheme.

Enter the infamous example of “Bitconnect”. As if its name, which is obviously trying to ride Bitcoin’s clout, isn’t already an indicator of an obvious ripoff, this crypto platform encouraged users to trade the latter coin for the prior’s, promising a 1% return in compound interest for the generous offer of its user’s bitcoin… daily. What made the scheme so convincing was that the platform actually followed through on its incredible promise for some time, incentivizing more people to temporarily forfeit their Bitcoin for the newer token. However, this arrangement was only sustainable during 2017, a predictable period of exponential growth for Bitcoin, which tends to occur every four years.

* NOTE how Bitcoin really does manage to see exponential growth- but only during certain time periods. Bitcoin has no administrators or representatives promising great returns- especially not consistent ones. This is what differentiates Bitcoin from a scam like Bitconnect, in that Bitconnect provided a “guarantee” of consistent, 1% daily returns on its buyer’s investments. There are no guarantees in the crypto market– especially not in the short term.*

Bitcoin experienced a major crash at the year’s end, and in a predictable fashion, Bitconnect shut down in the middle of the following January, taking everybody’s Bitcoins with them. Its users were scammed, lured in by the promise of unfathomable returns… and similar tales are bound to be told at the end of the 2021 bull run as well.

Lesson: If a cryptocurrency sounds too good to be true, then it probably is.


Cryptocurrency nightmare scenarios are as common as their success stories. If you’re watching all of your friends make gains on their various coins right now, do not be so foolish as to run after them over the fear of missing out. Personally evaluate what you’re investing in, and know the warning signs of a crypto scam. If your shiny new cryptocurrency, platform, or business is still young, has an unclear modus operandi, and is promising you the world, then you’re better off keeping your money in fiat… for now.

Then give it a year. You’ll thank yourself for your prudence.

COMMENT BELOW! What are the most catastrophic crypto investment stories you've ever heard– or experienced?