Not just within the crypto world, there are two Coins made in the past few weeks for special attention: Dogecoin, the mascot is a Japanese dog, safe moon, embodied by a rocket in the Logo, made with gains of several Thousand percent within a short period of time headlines. Both coins were until recently still unknown and almost worthless even in the industry.
But for several weeks now, prices have been rising again and again in big leaps, and digital change is becoming a source of money – at least for those of the investors who invested large amounts early enough.
For the few investors to whom this applies, this should be a stroke of luck, because the development of the two coins seems almost arbitrary at first glance: According to the industry platform Coinmarketcap, more than 9000 cryptocurrencies are now available worldwide, but the very few of them develop into established figures such as Bitcoin or ether in the long term.
Patrick Hansen, blockchain expert of the industry association Bitkom, is sure that 99 percent of all coins «probably have no future in the long term». How risky is investing in Dogecoin and safe moon are, and how the sudden Hype comes to the Coins?
Benjamin Bilski is CEO of the trading platform Naga, through which users can also trade Bitcoin. He holds the market for Cryptocurrencies due to the high number of Coins to overheat, Dogecoin and safe moon he currently sees as «pure Speculation». «This is because the development of these coins is heavily news driven.“
For example, the enormous price development of dogecoin can be explained by the tweets of Elon Musk. «This unpredictable and arbitrary dynamic has caused prices to rise and fall,» he explains. Thus, the fact that no valid forecasts could be made about coins such as Dogecoin or Safemoon makes investing in the coins risky for private investors.
Sören Hettler, analyst at DZ Bank, also warns: «Many cryptocurrencies, including Bitcoin or ether, were launched by the initiators with a comprehensible idea that makes sense from the perspective of many people.»Behind Bitcoin, for example, is the goal of creating a global currency that works without central and commercial banks.
The inventors of Dogecoin, on the other hand, created the currency solely as a joke. And also the safe moon Coin was created without the specific field of application, not even the developers behind the application are known.
This also applies to Bitcoin, whose developer is still hiding behind the pseudonym Satoshi Nakamoto. But the «Binance Smart Chain» blockchain – the digital infrastructure that Safemoon runs on – has been used by anonymous developers in the past for large-scale fraud and is considered vulnerable by some experts.
To what extent cryptocurrencies that have been created «without a sustainable purpose» can be valuable in the long run, potential investors must decide for themselves, says Hettler. However, he is certain: «Interested parties should have become aware that the segment as a whole is associated with great yield opportunities as well as risk of loss.“
Market analyst Timo Emden from the analysis house Emden Research puts it even more dramatically: «The risk of a total loss is incredibly high. Investing in Dogecoin, or safe-moon, a trip to the Casino.»The reason:» With small coins with a small market capitalization, it is enough to own a relatively small amount to influence the price. These coins are very vulnerable to manipulation.“
Benchmark market capitalization
According to Bitkom expert Hansen, a larger market capitalization is therefore basically «a good benchmark for the maturity and use of a token». But he adds: «But it can also be misleading, like Dogecoin.»Due to the sudden interest of many investors, the market capitalization rose rapidly within a very short period of time and no longer serves as an indicator of seriousness.
At Safemoon, the developers have also built in a mechanism to encourage steady price increases: those who sell their coins again will be sanctioned with a fee of ten percent, which will then be distributed among those who hold the currency. Hansen sees in safe moon for this reason, «a Parallel to the classic Ponzi and pyramid systems». Because: «in addition to Buying and Selling the Coin has absolutely no Use.“
The development brings back memories of the ICO boom that drove the industry four years ago. According to Naga CEO Bilski, the large number of coins that exist today is a result of that time. ICO stands for» Initial Coin Offering», based on the abbreviation IPO for» Initial Public Offering», i.e. a conventional IPO. In the crypto world, however, no company shares are issued in the form of shares on the stock exchange.
Instead, start-ups or private individuals collect money through the sale of coins, which can be created relatively easily by connoisseurs. So many of them are leftovers, but coins are still being added in large numbers. Dogecoin, for example, was created in 2013, safe moon this year.
Both have only really grown through social media, explains analyst Emden: «Twitter and Reddit are important building blocks for the price gains at Dogecoin and Safemoon. This is a completely new phenomenon that has never happened before.»In a time of investment emergency, this is particularly tempting for young investors: «These coins are an expression of the current programs of the central banks – and the question of where you can actually still invest your money.“
In addition, the number of coins issued by a cryptocurrency on the market plays a role in the hype. At both Dogecoin and Safemoon, developers are issuing large amounts of coins, so the unit price is extremely low – especially compared to Bitcoin, which is currently trading for $ 55,000.
According to Emden, investors should ask themselves before an investment who is behind a coin, whether the cryptocurrency has a valid field of application, thus fulfils a useful purpose within the industry and could therefore also be of value in the long term.
Although Bitcoin has been growing strongly again since the weekend, the market power of the so-called alt coins, short for alternative coins, is growing. If their share of the total market capitalization of all cryptocurrencies increases, experts speak of an»alt-season». «At least in the short term, an alt-season seems to be underway,» observes analyst Emden.
Last Thursday, Bitcoin’s market share fell below 50 percent for the first time since 2018, and the «Bitcoin Dominance Index» reached a low of 49.35 percent, according to industry platform Coinmarketcap. Currently, the figure is 50 percent, at the beginning of 2021 it was still 70 percent.