Posted Nov 9, 2021, 1:08 PM
The combined value of all cryptocurrencies surpassed $3 trillion on Monday, November 8. Bitcoin and Ethereum have “more than doubled since June”said Christian Parisot, analyst at the broker Aurel BGC to AFP.
In full expansion of the cryptocurrency market, scams and speculative outbreaks are multiplying: a cryptocurrency inspired by the “Squid Game” series with millions of dollars of investment evaporated, canine-themed cryptoassets that proliferate…
“Any team of developers can create an app and issue a cryptoasset”warns Martha Reyes, who leads the research of the Bequant cryptocurrency exchange platform, interviewed by AFP.
The boss of the policeman of the American markets, Gary Gensler, had moreover described this summer as ” Far west “ this exponentially growing sector.
The rug pull scam
The “Squid coin” illustrates the dangers for unsuspecting investors: this cryptocurrency, created on the theme of the hit Netflix series by anonymous people with no connection to the online viewing giant, has experienced dizzying success in a few days end of October.
According to some assessments, the market value of this cryptocurrency then exceeds $30 million. But buyers find they can’t sell it and cash in their profits, and in early November, the creators disappear from social media as the price crashes.
Even if the exchanges seem to have resumed, the sums invested have been siphoned off, and investors are searching in vain for explanations online.
“It’s a very visible type of scam that’s nicknamed ‘rug pull'”explains to AFP Eswar Prasad, an economist at the American University of Cornell, who sees “one of the many ways in which naive retail investors are lured into the promise of high gains, leaving them vulnerable”.
The vertiginous performance of the cryptocurrency market, whose value has increased sevenfold in one year, is indeed attracting uninformed buyers.
Even if they are particularly present, like their victims, in Eastern Europe, “These scammers operate on a global scalerecalls Kim Grauer, in charge of research for the firm Chainalysis. The rapid growth of decentralized finance (or DeFi) and investor ambition has created the perfect environment for ‘rug pulls’”.
To buy Squidcoin, investors had to connect to a decentralized platform, PancakeSwap. Unlike major cryptocurrency exchange platforms like Coinbase, which is registered with US and European regulators, DeFi brings together projects that want to do without a third party validating transactions, and anonymity is often possible there.
In France, Romain Chily, a lawyer at the firm ORWL, specializing in cryptocurrencies, says he sees passing ” each month “ new cases of cryptocurrency scams.
According to him, DeFi harbors “full of products that work quite well, but for savvy investors”and he advises “don’t start there” because, in the event of a problem, “the chances of recovering your funds are extremely slim”.
He recommends turning to sellers accredited by the Financial Markets Authority (AMF) and verifying that the platform is not on the blacklist of the financial policeman.
Even on regulated platforms, the seriousness of certain projects leaves one skeptical. Since the beginning of the year, two dog-themed cryptocurrencies, dogecoin and Shiba Inu, have seen their value jump: the first was created as a joke in 2013, and the second in the summer of 2020.
These cryptocurrencies, created from internet phenomena, are nicknamed “meme coins”, and are particularly volatile.
But professionals make a difference with scams: ” it’s a branding exercise. It kind of reminds me of the surge in GameStop and AMC stocks at the start of the year, which had no connection to the intrinsic value of those companies.”comments Ms. Reyes.
The same goes for Joshua Barraclough, who runs the “pro” version of the BitPanda cryptocurrency exchange platform, based in Austria. This expert advises taking the time to do some research and ask yourself a few questions before investing: “Do you understand what the project does? Does that look dodgy? If it looks like it, it probably is.”.