How Not to Get Rugged by Sh*tcoins

Tracey: [00:00:21] Welcome to the crypto curious podcast designed to help you navigate the dynamic world of cryptocurrency. Hello, my name is Tracey. And as always, I'm joined by my colleagues from the Bamboo app Blake and Craig. How are you going, guys?  Blake: [00:00:35] Well Tracey, how are you doing? Tracey: [00:00:36] Well, Craig, how are you going? Craig: [00:00:38] Good. Thanks, Tracey. This is a also a topical episode. Tracey: [00:00:42] Yes, very topical. There are well over 10,000 crypto coins out there today, and unfortunately, probably 99 per cent of those will likely not be around in another 10 years. So a lot of these are what we commonly refer to as shitcoins, or some of these are meme coins now, for name, a few of those we're looking at your DOGE coins or Shiba or SafeMoon. And a lot of these type of coins are typical of pump and dump or hype type scenarios, and they result in what we call rug pool events. Now, if a lot of this isn't making sense and it seems like a lot of millennial type jargon, then stay with us because all will be explained today. We're going to talk about the characteristics of these type of coins so you can be sure to keep them out of your portfolio if that's the strategy that you want to go with. So we're going to start off with meme coins, and these are probably some of Craig's favourite solely kick off name. Craig: [00:01:43] Yeah, I'd also like to just bring it back to the market cycle episode we had last week where we we touched on the hype cycle. Now these main coins are normally the hype cycle coins, but I guess we can't get started until we talk about the OG Dogecoin Australian made. Actually, Dogecoin was made in 2013 as a joke based on the Shiba Inu dog meme, with the colourful comic sans font like such. Well, much where, like all that old internet meme culture that sort of dated now, but it really went vertical when Elon Musk started tweeting about it last year. And now apparently, you can use the coin to buy a Tesla merch, and Tracey: [00:02:32] all the kids seem to know what the DOGE dog was the part of a game or anything. I don't actually know it was part of a game. How do the kids know what Craig: [00:02:39] this thing is like? A weird part of internet history where, like the Shiba Inu dog meme was just circulating in it? Yeah, just translate it to a Tracey: [00:02:48] crypto and we are we proud that it was the Aussie? Craig: [00:02:51] Did it? Or Yes, we are. OK, so that's the story of the OG Dogecoin. Now, as you can imagine, there's a bunch more, but there's many differences between meme coins and the other coins. Blake: [00:03:04] Yeah, the major difference between a meme coin and other cryptocurrencies like bitcoin. And the theory is that bitcoin and Ethereum have real utility. People use it for all sorts of stuff. I mean, coins usually serve no real well purpose except for buying, you know, Tesla merch. And if it is created for investors to potentially speculate on and take a risk on to try and make some money. And some of these meme coins gained popularity due to the fact that celebrities and everyday investors promote them, which your results in the price hitting astronomical high levels and the price, as we know, is derived from the supply and demand dynamics. And these often spike in popularity for very short periods of time and then return to lower prices after that their cycle. Craig: [00:03:58] I think due to the fact of how successful Dogecoin is like it is in the top 10 now developers and anyone really can just fork a main coin and make their own. I think now there's over 5000 meme coins in existence, so it does make up a bit of the market. Blake: [00:04:15] Yeah. And just to clarify what a fork is, of course, you know, all the code bases for most of these cryptocurrencies are open source. Anyone can go on and copy the code base of Dogecoin and then change the logo to a head and make their own meme. Coin has thousands of them of people making their own meme coins. Tracey: [00:04:35] And I think we mentioned this in a past episode you on again, where Elon's actually going to put Dogecoin on the Moon. And we did say this, and what he means by that is that he's built this spaceship with these companies basics, and it's called the DOGE one and the mission we be paid for entirely by Dogecoin. Insert lots of puns here about DOGE going to the Moon. There have been a mini, so that's DOGE. But what about all the. The comical coins that are out there, we've got Comey's baby DOGE Shiva. Alan Coin SafeMoon come rockets now. These actually lower my IQ as I say them. So that's actually a great way for you to spot a meme coin. They often have names after things that are on the internet, and they're designed to get a laugh. They're designed not to be taken very seriously by Craig. Craig: [00:05:26] No, but a tushnet before they do come to prominence in a hype cycle. So when your cousin at the family barbecue tells you that if she ever hits $1, he's a billionaire. But little does he know that the circulating supply of Shiba is one quadrillion, so if she were to hit a dollar would have to be like, like, it's just impossible. But yeah, it guess that's just a way that people enter the market with these really, really cheap, funny coins that people relate to. It does, you know, it has performed quite well for people, though it has. Blake: [00:06:02] Yeah, yeah, that's kind of the irony of it. And that's why we're talking about it today. And there was in particular one guy in the US that I think put 500 bucks of his Social Security check or like his Covid response check or something like that into into Shiba and ended up making like a few billion dollars of it. Tracey: [00:06:24] That is madness. You're going to you can lose as well. Like we're saying, there's people that do that. I know people back in the back at the time as well were trying to emulate that. They were selling their cars. And, you know, these are people like you and your guy selling Macan. And I put all the money into this meme coin thinking that that was a sure thing. And then they were they were wrecked, you know, which is a common expression. They that money's gone. So you need to be super careful when thinking you're just going to, you know, don't put the house on it. Blake: [00:06:48] Yeah, it's very much like a casino. You know, it's not a great bet putting money into these things. But yeah, some people also did really well. And there is a lot of pushback from people in the media and, you know, traditional finance because they say that, you know, these tens of billions of dollars looked locked up in these protocols, these meme coins. There is a misappropriation of capital, and the capital could be used for all sorts of things, like funding, innovation, businesses going to charity or buying real world assets. So, yeah, it's an interesting dynamic that it represents. Craig: [00:07:26] Interesting. You say that because Vitalik, so who made a theory and we've talked about him previously. He got a job. A lot of Shiba. And he actually sold it as soon as he got the coins because he's very against meme coins. He sold it and actually donated to India's COVID 19 response, and that really made a difference in the real world. So that's sort of that finance argument that Blake says all these millions locked up. Like, what could we be doing with them instead? Tracey: [00:07:54] I didn't know that. That's awesome. So to finish off on meme coins, we need to say that as as we've just been saying, investing in these type of hot coins is unpredictable and more like gambling like Blake said, you know, you're better off just going to the casino, so nothing is certain in these markets. So we're going to go to a break. But when we get back, we're going to look at what falls into the classification of what we're calling a shit coin. And these are the coins out there that are a bit more legitimately trying to fool you as well. So how do we spot those coins after the break? We'll tell you. Now, let's look at what a shit coin is, unlike the meme coins that we've just been talking about that are easy to spot due to their ridiculous names. They should coins a little bit harder to spot because their names are relatively smart. And these guys are trying to portray themselves as a legitimately good option to invest in so their names can sometimes be a little bit more technical and crypto like even. Craig: [00:08:54] Yeah, so we need to look at what a bitcoin actually is. Now the definition if you Google Sheet Coin is a coin that lacks a use case and fundamentals, but it's also important to mention a bitcoin is mainly subjective. So I might think something's a cheat coin. Blake might not think it's a bitcoin, so it's not necessarily a list of fundamentals that you take off. It's something that you describe a coin with how you feel that's falling short of your investing criteria. Now, give you an example. There are bitcoin maximalists in the crypto space. They only buy and hold bitcoin. They think that every other use of blockchain technology is the shit coin may imply actually went to a bitcoin conference. Like, when was it late last year? And we were talking about Ethereum and they say no, a themed bitcoin. They only believe that bitcoin is the king. They think Ethereum is, you know, lacks fundamentals, lacks a proper use case. Of course, that's a subjective argument. They believe that it's a cheap coin, and that's their opinion. But what I'm trying to say is just because you might think something's a shit coin doesn't necessarily mean it is. Tracey: [00:10:05] And when we're saying shit coin, which I feel so rude, silent mom's going to sell me off because we're saying shit so much. But when we're saying that, we're talking about an old coin, we're talking about an alternative coin other than bitcoin, and we're trying to spot the ones who we think are not great coins to be investing in. Correct? Craig: [00:10:20] Yes, correct. So like like what are some indicators that you look for some red flags that you think would make something a shit coin in your books? Blake: [00:10:28] The first one that I always look at is the market cap, which we've discussed previously, which is the supply times, the price. So for example, if you have 100 coins at a dollar each, the market cap would be $100. And often some of these coin projects, they played trickery with their market cap and their supply. I have a quadrillion supply with a very low price. So that investors believe that potentially it's a good deal, but there's all sorts of trickery that they can play. You know, their supply and price that you have to watch out for. And often there's gaps in data or, you know, fake trading volume that you can also watch out for. And you know, some of these tokens that have a very low price and don't have much utility can be, you know, analogous to penny stocks in the traditional financial sector. And the market cap can also be inconsistent with the size of the community, and projects might work very hard to increase the price of the token without there being any one actually using it. And these sort of activities are illegal in traditional financial markets like wash trading and market making to to build the price. And there's pretty strict regulations in Australia, the U.S. and Europe in traditional capital markets. But crypto is unregulated, so we don't see the same type of diligence around the regulation. And it will catch up at some point in time. But you know, one way that you can avoid picking up some of these tokens is relying upon a high quality exchange when you're buying them. Exchanges like Coinbase and Kraken and, you know, Swift Dex and Independent Reserve will research their tokens before they list them to ensure that their their customers aren't buying anything that's lacking too many fundamentals. This doesn't mean that they're all good, but it just means that they're potentially not scams. Yeah, we Tracey: [00:12:32] we were talking about this guys yesterday in regards to whether these type of coins were all on DEXs or not and were having a bit of an argument about it. So I was saying that back in the day when I was doing a bit of trading, we were kind of looking for these type of coins because I would pump so heavily early on. So exchanges like Key Coin and IFTTT would release these type of coins early on because you were looking for that pump early on, that a lot of exchanges that decentralised exchanges really spoken about in the past. So DEXs like Uniswap and PancakeSwap or sushi, anyone can put their tokens on there. So there's no vetting process when it comes to these type of DEXs. So like I said, anyone can list their tokens. So if you're looking at a coin that you've just heard about and you're checking it out on CoinGecko or CoinMarketCap and then completely just on all of these decentralised exchanges, that could be a red flag also. But then, Craig, you're saying that that's where all of your coins are. Correct. Yes. Craig: [00:13:31] So I guess that's your red flag for me. My my red flag. Tracey: [00:13:39] Just kidding. Not only your Craig: [00:13:40] coins. Honestly, about 80 percent of them are on de-centralized like not even on the beach changes, but like, I guess my red flags that I look at is if there isn't detailed information about the token, like what the plan actually is like, what's the roadmap? Is there a community, the people involved with the project talking actively? Are they keeping the team updated? Tracey: [00:14:04] Yeah. So all the fundamentals that we've gone through in a couple of episodes back. So you going through your fundamentals? Yeah, yeah. As far as a really quick flag list to look for, like Blake says, these exchanges, they go through their own checklist. They are quite detailed. And if they're on these big exchanges, then a lot of the hard yards are done for you. Craig: [00:14:21] Yeah, exactly. But you know, in saying that the big guys also list alone, they list baby doge. That's the devil's advocate. But yeah, I mean, the red flag for me is just the information from the team, like if if the team is if it's very vague or there's no white paper, there's no information on any coin website, the royal anonymous, you know, that sort of raises a few alarm bells in my book. Tracey: [00:14:44] And Blake, what were you saying about the trading volume that you needed to get on CoinGecko? Blake: [00:14:50] Yeah, sometimes an indicator to see if it's a coin or is somewhat legitimate is, you know, seeing it's fits even listed on CoinMarketCap or CoinGecko or your projects need to maintain a certain amount of trading volume to, you know, get onto these these lists and for for an extended period of time. So yeah, that's certainly one filter that you could potentially use. But at the same time, you know, a lot of projects put fake volume through their coins just to get onto these lists specifically. So, you know, it isn't just black and white. Craig: [00:15:24] I guess this is a bit different to the ASX in the Nasdaq, where there's, you know, tight controls around trading behaviour and you know, there's checks and balances in place. Whereas we've said before crypto's still pretty much the Wild West in terms of people trying to trick you. Tracey: [00:15:40] So how else can we actually look out for coins, not being shit coins? What are some other giveaways like? Blake: [00:15:46] It's always important to check the white paper. Now lots of people don't, you know, go this deep to look to do their due diligence. But after just looking at a dozen or two, you're going to really see which which white papers. You have really rich, interesting information and which ones potentially have just been thrown together or have been copied and pasted in white paper is essentially like a business plan for these crypto projects. It talks about what they're trying to do, how they're trying to do it, the economics of it. And it's also potentially a method that you could use is you're looking at who's invested into the project. And if you have big, high quality investors like Coinbase or a16z or orthogonal trading investing into the projects, you know it's going to be a good one. Tracey: [00:16:33] And I think we need to touch on one of the biggest and really obvious things to look for is whether or not the coin actually has a purpose or a use case. And I know we're all big on this one. You know, we can think back to the early 80s in crypto when all the new altcoins out there were just promising a better version of bitcoin. And then, you know, everyone was every next coin was promising a better version of Ethereum or to be a serial killer. And now, you know, the next coin is promising to be a better version of whatever DeFi coin is out there or NFT. So everyone's just being a different version of something. But is there a purpose or is there a utility or use case? Craig: [00:17:09] I mean, I think we see it time and time again. Ethereum made its way, and then we saw the Ethereum copycats, then DeFi projects made its way. Then we saw, you know, copycats of those DeFi projects. So, you know, don't get me wrong, some are serious contenders to, you know, at least compete. You know, Solana people, you know, brushed off Solana, but obviously now it's going to be a mainstay. But in reality, you know, I've got to think which ones will survive in 10 years is sort of the question you want to ask yourself. Tracey: [00:17:41] One thing I feel we need to touch on when talking about old coins that could perhaps be shed coins, and I'm thinking about a few bigger type coins that are in the top 50 right now. And yes, these type of sheet coins can be in the top 50. They can be in the top 10 is the fact that they are overhyped coins. These are the ones that have cult like promotions, and I think that quality projects don't need a heap of marketing. They don't need to pay Shiller's or YouTubers to push their coins. There are projects out there with absolutely no substance behind the doors, but they have a massive marketing budget. Okay, and they've done really well from the beginning. But slowly what happens is, like anything, they are exposed for what they really are and need. I have a feeling that they. A few more of those to come, perhaps. Craig: [00:18:31] You know, when I was starting out, I was full and vigilant about YouTube, but a YouTuber or an influencer mentioning a coin. And then you buy it and then it just dwindles away because they're obviously using you as liquidity to sell their position. So, as Tracey said, the really good ones, they shouldn't really need Shiller's or YouTubers that pump it. You know, there's been a few Twitter threads maybe we can share some in the show notes below about people that actually expose these influencers. They timestamp for the date of the tweet and then they show the graph after. And nine times out of 10, they're always just going down slow because Tracey: [00:19:08] these guys have got money in there. They've got a lot of money in these coins and it clouds their judgement, you know? I think that's what you're alluding to. Blake: [00:19:15] They're given free coins to promote the project. And then these influencers, they promote the project to their audiences, sometimes millions of people. And then as their audience starts buying, that allows them the influencer to start selling down the tokens to make profit. And this doesn't seem too sinister on the surface. But more often than not, they're taking advantage of, you know, their position in the market. And essentially it's almost like a form of insider trading. You know, it's it's pretty dodgy and there are lots of influencers. Have you now have a really bad reputation from this sort of behaviour, particularly throughout 2017 and 2018? Tracey: [00:19:54] Yeah. And I think you can actually spot those guys if you start to watch a few YouTube clips, those guys become pretty obvious from their language and the way they set up the eclipse also. So now let's talk about what we mean when we say rug pulls. Craig: [00:20:09] Have you guys ever been rug pulled like crazy? Tracey: [00:20:12] I have. I've definitely got a couple of rug pulled stories Craig: [00:20:16] like, have you? Blake: [00:20:17] I don't think I have. Yeah, I'm pretty diligent. Tracey: [00:20:19] You tell me your story and I'll tell you my Craig: [00:20:21] okay, I'll start. So I've been a victim of RuPaul's, mostly from doing the exact opposite of what this whole podcast is about, huh? Yeah. But you know, off the top of my head, it was many of these copycat projects like Sushi came out and then everyone wanted their own food token. I got robbed off these two cod spring roll and kimchi said, So stupid now, but like, they literally were like they literally ninety nine point ninety nine percent down. And like, you literally can't even sell because there's no liquidity. It's complete shambles, be it. How it works is pretty much everyone's buying into this token. And there's obviously liquidity, you know, for people to buy and sell. And then the people that control the project pretty much pull the liquidity out, Ron. But, you know, probably go to the Bahamas and try to skirt the SSA or something like that, you know, get Raj property, you know, probably once a year to do a rug. What about you? Tracy tells us. Tell us your story. Tracey: [00:21:28] I think when you're trading, there's always going to be a rug pull story because when you trading, that's the nature of it. Someone in your group tells you about something that someone else has spoken to. That's, you know, that's due for this. There's going to be announced and we're going to do this. So do you take their word for it? You put a certain amount in, you know, if you've got your checks and measures with you risk in place, really, you're not putting too much in, but sometimes you buy into someone's story a little bit too much and you get a little bit too excited and you put a little bit more than you thought you probably should. And then was maybe when he got the dates wrong, or it's actually this isn't happening or whatever. And you know, it maybe didn't turn out as best as it should have Blake: [00:22:06] some rock pools that I know of exchanges that would set themselves up to start allowing for people to trade on their the. There's been some Australian and New Zealand ones. And then, you know, the founders of the exchange, you take all the money on it and run and you never, never hear from them again. And there's other examples of initial coin offerings have groups, you know, raising tens of millions, even hundreds of millions of dollars and then realise that, hey, you know, we don't actually want to build this product. We'd rather take the cash and run and then, you know, you never see them again. And you know, because this industry is unregulated, there's a lot of risk associated with participating in it. And you know, these are the things that you know, we will have to be careful of. And you watching out for? Tracey: [00:22:53] So on that maybe you guys have got a good story of a rug pull or or some coin that you've invested in that just didn't turn out right? So send us an email and let us know because we need to make Craig and I feel a little bit better. And hopefully after today's episode, you've understanding a little more about these meme coins and shit coins and how they interact with the wonderful crypto space that we're in. And we need to point out again that these coins in particular are really like just heading to a casino. So if you are going to take a punt on these? Proceed with caution because the money you pop in. There may not be seen again. On that note, let's leave it there for today. We want to know what you want to know about crypto, so please send us an email at podcast. I get bamboo iron. And follow us on social media. All those details are in the show notes below. And remember to fill out the listener survey if you haven't already. And don't forget to write the show in your podcast app. And that's it for today. We'll see you next week. Craig: [00:23:53] Bye bye, guys. Don't get rugged.