Dangers Of Investing In Unverified Coins: Avoiding Losses In The Crypto Market

Dangers Of Investing In Unverified Coins: Avoiding Losses In The Crypto Market
To safeguard your crypto portfolio and avoid worthless coin investments, take these proactive steps.

Imagine investing your hard-earned money in digital assets that promise massive returns, only for them to vanish in a blink. This is unfortunate for investors who blindly invest in such unverified coins.  Cryptocurrency investments have become quite popular, drawing the interest of many people. They are often tempted to invest in coins not many know about, hoping for big profits. 

Unverified coins are digital currencies that lack the same recognition, trust, and verification level as established ones like Bitcoin, Ethereum, or major large-cap coins. They might have promising ideas, cutting-edge technology, or unique features but are not as battle-tested. Think of them as startups in the crypto world, and like startups, they can be riskier investments and might make you lose money.

So, are you afraid if you are one of those investors mentioned above? 

Well, to know the answer, keep reading this blog, as it will help you determine whether you are safe or at risk of losing your savings. This piece of ‘Dumb Ways To Lose Money’ will help you understand the risks of unverified coins. It will also help you know and show you how to secure your investments from potential losses.

The Attraction Of Unchecked Coins

Many are captivated by the charm of unverified coins due to their new and imaginative ideas in the cryptocurrency world. These innovative projects hold a particular allure as they promise to change the market with unique concepts. The chance for big gains quickly is a strong pull, attracting investors who want quick profits.

However, it’s important to remember that, despite their appeal, these unverified coins come with risks. To ensure solid investments, it’s necessary to be watchful and carefully investigate, even with promising new projects.

In the quest for profitable opportunities, the temptation of high returns may lead many towards unverified coins. The attraction of seeing investments grow rapidly often overshadows the need for careful consideration. The excitement around these coins and the fear of missing out (FOMO) can make clear thinking difficult.

Although these projects may seem appealing, it is vital to check them out. Examining the coins’ legitimacy, practicality, and long-term stability can protect investors from possible problems, creating a safer and smarter approach to cryptocurrency investments.

Understanding The Coins

Anyone hoping to traverse the crypto sphere successfully must comprehend the nuances of these coins. 

Key features of a coin include its distinct value proposition, use case, and disruptive growth potential. We have highlighted the factors you must consider while understanding the authenticity of these coins.

Risks And Challenges

  • There aren’t strong rules to monitor token fundamentals in the cryptocurrency world. This can lead to some problems because, without clear guidelines, matters can seem haywired. Also, some people create fake projects or plans to steal money from those who know little about cryptocurrencies. They know newcomers may not understand all the details and could fall into their traps.
  • Pump-and-dump schemes are another complex issue. These occur when someone rapidly increases the value of a coin and then abruptly allows it to plummet. Individuals who invest without understanding the ramifications may face difficulties. It is essential to be cautious and aware to avoid these problematic circumstances.

Identifying Unverified Coins

Verifying the information on coins is essential to avoiding any red flags. This can avoid coin investment hazards. We have created a checklist to assess the legitimacy of a coin or initiative.

1. Start With The Fundamentals

  1. Start with simple steps like using Google and X to research the token and its team.
  2. Trust official websites, news articles, and verified social media accounts for accurate information. Look for whitepapers or official documents released by the project team. Whitepapers provide in-depth information about the technology and goals of the project, making them valuable resources for assessing legitimacy.

IMPORTANT: Search online for the token’s purpose and information; avoid projects without clear websites or information. Genuine tokens usually have well-established websites and clear explanations of their purpose.

2. Confirm Code On Etherscan

  1. Go to Etherscan and make sure to check the token code. If you can’t find a verified code, it’s most likely a scam. Scammers often hide their code because it might have issues, mistakes, or have a different purpose than what they say.
  2. Also, check the comments on Etherscan for what people are talking about the token. If someone calls it a scam, it’s almost definitely a scam. If you have been scammed before, don’t hesitate to leave a comment, too.
    Go to Etherscan and click on the comments section to find out what others say about the token.

3. Explore Token Details On A Token Tracker

Look up the token’s information on a token explorer like CoinGecko or DappRadar. If you can’t find the token listed there, it’s likely a scam.

4. Examine Token’s Exchange Listings

Take note of how many different exchanges host the token. If you only see the token is traded on a few decentralised exchanges (DEX), it’s highly likely to be a scam.

5. Assess Token Liquidity

Look at how much cryptocurrency or tokens are in a token’s balance pool. You can easily check on platforms like Uniswap V2 or similar places. Liquidity measures how much cryptocurrency or tokens are locked in smart contracts. This helps people trade on decentralised exchanges. If the liquidity is lower than $100,000 or it’s decreasing quickly, it’s likely a scam.

While using a DEX, check other important things happening on the blockchain, such as transaction volumes and counts.

6. Utilise Third-Party Analysis Tools

Unverified coins that have little to no history can be quite dangerous. But be at ease. Here are some third-party tools you can use to identify an unverified coin. 

  1. Smell Test: This tool automatically checks the token. If it gets a low score out of 100, it’s more likely to be a scam. Example: Tokensniffer
  2. Honeypot Check: Look out for honeypots. These are smart contracts designed to catch hackers. They have hidden code that activates when someone tries to exploit them. It’s best to steer clear of them.

Case Studies

We shall now delve into a real-life example of the dangers of investing in unverified coins. Squid Token serves as a perfect example. Let’s get into the details, shall we?

Squid Token: An Enigma of a Crypto Dream Gone Bad

Squid, a digital token, had been trading for just 1 cent, but its price soared to over $2,856 in less than a week. However, a significant setback occurred as its value plummeted by 99.99%.

The intended purpose of Squid was to use it in a new online game inspired by a Netflix show in which individuals were compelled to participate in risky games for financial gain. The game’s launch was scheduled for this month. Nonetheless, cryptocurrency experts have cautioned that Squid might lack authenticity.

One major indicator was that individuals who had purchased Squid tokens could not sell them. Critics also highlighted numerous spelling and grammar errors on the website.

Presently, the website has vanished, and the social media accounts that promoted the tokens have also disappeared. Squid was available for purchase on decentralized crypto exchanges such as PancakeSwap and DODO. These platforms enable direct connections between buyers and sellers without central authority overseeing transactions. 

New digital coins can be listed for sale on these exchanges immediately upon creation without undergoing proper verification checks or adhering to established regulations. Avoid them at all costs, and don’t worry. We’re here to answer any concerns you may have regarding the “what not,” “how,” and “when” of the situation.

Tips On Protecting Your Portfolio Against Unverified Cryptocurrency Pitfalls

To properly traverse the crypto minefield, you must empower yourself with information and exercise caution. Several doable actions can reduce the dangers connected with unreliable cryptocurrencies. 

From carefully examining the team behind the coin to diversifying your portfolio and implementing stringent risk-management procedures, we have listed ways to steer clear of the dangers.

Read along as we explain the know hows of protecting yourself and your hard-earned money:

1. Choose Wisely

Before investing, take the time to research thoroughly. Focus on projects that have a proven track record and a clear purpose. Look for projects with a strong team and transparent information. 

Avoid rushing into investments that promise quick and huge returns without substantial evidence to support those claims. It’s always important to go through any project’s tokenomics. This will give you an idea of how the technicals align with the project’s fundamentals.

2. Stay informed

The cryptocurrency market is constantly evolving. Stay updated with the latest news, trends, and developments. Learning about the market dynamics and the technologies behind cryptocurrencies can help you make informed decisions. 

Being well-informed allows you to identify potential risks and opportunities, helping you avoid making impulsive decisions that could lead to losses.

3. Verified exchanges and platforms

When you’re getting into the cryptocurrency world, it’s wise to buy your coins from well-known and trusted exchanges like Binance and CoinDCX

Just like you prefer shopping at established stores, verified exchanges have a reputation for being safe and reliable. They have systems in place to protect your money and personal information. 

So, before you dive in, do some research to find exchanges that are recognized and respected by the crypto community. This way, you can start your crypto journey on a secure and solid foundation.

How To Create A Strong And Balanced Portfolio

There’s an old saying that goes, “Don’t put all your eggs in one basket.” Diversifying your portfolio is essential to avoid losing your hard-earned money and investments. 

Here is a detailed explanation of how you can create a strong and balanced crypto portfolio:

When you’re putting together a solid crypto portfolio, it’s like making a good recipe. You want a balanced mix of different things. Just like you don’t eat only one type of food, you don’t invest all your money in just one crypto. Include well-known ones like Bitcoin and Ethereum, just like you have staples in your kitchen. 

For example, if you have some Bitcoin as a sturdy base, you can explore other new coins. It’s like mixing old favourite dishes and trying out new recipes. It’s always preferred that 50% of your portfolio contain Bitcoin and Ethereum. Then, they must be followed up by 30% in large-cap coins and 20% in small-caps.

The Important Note: But be careful. It’s like crossing the street – you look both ways before you go. Similarly, before investing in any new coin, take your time to learn about it like you read reviews before trying a new restaurant. This cautious approach can help you avoid problems. 

Remember, a mix of solid, familiar coins and some new ones can make your portfolio strong. It’s like having a mix of trusted friends and making new connections. This careful mix can give you better chances of success and safety in the long run.


In the unpredictable world of cryptocurrency, steering clear of unverified coins is crucial to safeguarding your investments. Falling for the allure of quick gains through unfamiliar projects can expose you to unnecessary risks. 

By adopting the tactics meticulously described in this extensive blog, you can build strong barriers against the dangers of unverified coins. 

These steps, which include creating strong risk management procedures, diversifying your portfolio, carrying out thorough due diligence, and vetting the authenticity of projects, strengthen your financial fortress. 

We have concluded yet another article on ‘Dumb Ways to Lose Money.’ We will continue to write such articles as incidents occur until then, stay safe and happy researching and trading.

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