How to determine if a crypto project is legitimate?

The booming cryptocurrency market has generated enormous interest from new investors. The rise is so promising that new parts are added almost every month. There are now more than 16,000 crypto coins traded, according to CoinMarketCap, a market research agency. But this rapid expansion is proving to be a cause for concern as many coins are launched for the sole purpose of riding an existing trend or euphoria and cheating or swindling investors out of their money. In such a situation, how to differentiate legitimate coins from illegitimate coins?

To an amateur investor, most coins appear similar with their respective promise of return and the function they represent. An example of a coin industry scam was the Squid Game token. Launched following the enormous popularity of the Netflix show of the same name, it has grown in value and lost at lightning speed. The developers disappeared with tokens worth a million dollars, leaving investors dry.

However, there are a few red flags that all investors should keep in mind when investing in a new coin – or largely in the cryptocurrency industry. Here are a few:

1.Check the project

As a rule of thumb, always search for the project’s website and its white paper. This is one of the most reliable ways to ensure that the crypto project is legitimate. Each project publishes a white paper, explaining the purpose, idea, and design of the underlying blockchain and other technologies behind the project. The white paper is available on the project website. Read it and check the details with other sources.

2. Promise of unrealistic returns

If a project promises high returns in the short term, hold back and learn more about it. Any investment takes time to mature. Given the volatile nature of the crypto industry, it is always prudent to invest for the long term. Short-term price movement is okay, but extreme volatility should be read as a warning. Additionally, scammers use phishing emails and social media credentials to contact novice investors. Be careful with them.

3.Follow the URL

Scammers usually use website URLs that look similar to the original. If you don’t see a lock icon in your browser’s address bar, next to a website, it is not safe to visit the website. Make sure the URL uses “https” and not just “http”.

4.Follow the creators

Find the people behind the project, the governing body, the foundation that supports it, etc. Thorough research is always a useful tool against scams. If the creators of a project are anonymous, it is a red flag.

5.Fake Endorsements

Scammers often try to add legitimacy by adding the names of influencers and celebrities to their project without approval. They understand that people trust famous voices and try to use this as a trick to deceive gullible investors. While some tech entrepreneurs and businessmen have supported crypto, they have only approved a limited number of coins. Check the claims.

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