The Spamcoins of Reddit and Twitter
Last week, I wrote about the deflationary Binance token Gravitoken (CCC:GRV-USD). Based on the coin’s burn rate, GRV’s price would theoretically rise to $1,337,000 by next year. And true to form, prices have already jumped from $0.00081708 to $13 since it first crossed my radar — a 16,000% return.
But there’s one small problem:
“Whose coins get burnt, however, isn’t so clear. Rebasing a currency means affecting every user unless the token buyback (set at 3.27% of transactions) covers the amount. And careful readers will notice that another 3.27% of transaction fees are unaccounted for.”
— Moonshot Investor, Sept. 20
Fast forward to today, and the only clear winner from the project has been GRV’s anonymous developers. The dev wallet has cashed out at least $45,000, while other closely controlled wallets appear to have earned even more. Not bad for a day at the office.
That hasn’t stopped retail investors from jumping in. Gravitoken now boasts more than four times the number of holders it did ten days ago, even as its token count has shrunk from 6 trillion to 1 million. Many holders have likely seen a chunk of their holdings vanish into thin air.
But why do so many investors jump headfirst into these Spamcoins? With almost every other option looking just as bad (more on this later), perhaps the question we should be asking is: why don’t they?
Reddit Cryptocurrencies on the Rise
For some lucky souls, Reddit has provided a golden ticket to financial freedom. A quick check of public ledgers shows that Dogecoin’s (CCC:DOGE-USD) rise from 0.01 cents has turned at least a thousand DOGE millionaires into U.S. Dollar ones too. And SafeMoon’s (CCC:SAFEMOON-USD) 125x return rewarded at least 1 million active wallets by the time the token peaked in April.
The best of these Reddit investors also know when to sell. Many began replacing Cardano (CCC:ADA-USD) with other altcoins two weeks ago, just as I was recommending Moonshot investors do the same. And many of these same investors have no love for SafeMoon, Tron (CCC:TRX-USD), EOS (CCC:EOS-USD) and yes, even Dogecoin, due to their lack of development (Cardano and Solana (CCC:SOL-USD) are also notoriously hard to program).
“Safemoon bag holders admit losing $100,000+ and congratulate each other for having ‘diamon [sic] hands’! CANT MAKE THIS S**T UP”
The CryptoMoonShots of Reddit
But tracking these crypto Reddit traders isn’t quite so straightforward. Lightly moderated subreddits like r/CryptoMoonShots tend to draw spam by self-promoting cryptocurrencies. And single-token forums such as r/SafeMoon cater to diehard fans who have never considered the word “sell.”
Instead, the leading traders are spread among various subreddits — r/CryptoCurrency, r/CryptoMarkets and r/Altcoin, among others — as well as Twitter (NYSE:TWTR) and Discord. To save you time, here are two of the top trades on their radar right now.
Reddit investors have rekindled their love affair with Algorand (CCC:ALGO-USD), selling stakes in ADA to make room in their portfolio.
It’s not hard to see why. InvestorPlace’s Ultimate Crypto picked up on ALGO more than 16 months ago when prices were sitting at a mere 20 cents:
“Algorand (ALGO): Founded by one of the smartest computer scientists in the world and using the next generation of blockchain technology, this coin is focused on growth and taking on the big boys in Ethereum.”
The Ultimate Crypto team had a point. Algorand was created by Dr. Silvio Micali — an MIT professor and previous winner of the Turing Award — to solve Ethereum’s (CCC:ETH-USD) speed and cost issues. The result: a Pure Proof of Stake (PPOS) protocol with lower transaction fees than either Ethereum or Cardano.
Now, it’s Reddit’s turn to jump in.
I’ve also put out a “buy” recommendation for Algorand. Though the crypto lags far behind its Ethereuem-like peers, its smaller starting base makes this a currency to watch.
Earlier this year, a Czech-based DeFi project came up with an intriguing business idea: why not give investors the ability to directly convert ERC-20 tokens to BEP-20 ones and vice-versa? Doing so would cut out middlemen exchanges like Binance (CCC:BNB-USD), which levies a BNB “tax” on each transaction in the form of fees.
Redditors have jumped on board. HASH Token (CCC:HASH-USD), the coin funding Hashbon Rocket development, is up 3x from its initial pre-sale price. And a CertiK audit is already in progress — a promising sign for any up-and-coming token.
Investors, of course, will have to swallow some lumps. First, HASH is only available via Metamask — Coinbase (NASDAQ:COIN) and Robinhood (NASDAQ:HOOD) traders need not apply. Second, the partially-doxxed team doesn’t mention credentials — even the most experienced Reddit crypto investors could be walking into a trap. And finally, Hashbon is far from the only outfit working on cross-exchange methods — centralized exchanges like TrustWallet already convert ERC-20 and BEP-20 tokens.
But investors looking to get in on the ground floor of a Moonshot could do well with HASH. If Hashbon succeeds in its goal, it could become yet another successful DeFi project to reward investors.
Bottom line: Reddit has become an indispensable tool for early-stage crypto traders. ALGO and HASH are two cryptos to watch.
The Frauds and Pumps of Reddit
However: readers should be wary. Lightly moderated crypto subreddits make a tempting target for Spamcoin marketers.
Take MicroSHIBA (CCC:MICROSHIB-USD), a coin that took investors for a one-way trip down 90% last August. Much of the initial Reddit hype appears to have been produced by bots.
“Absolutely epic project. The dev is based and experienced Mod/admin team of 40 people are super active & helpful. Tokenomics are amazing Both auto BNB rewards AND reflections!”
But the charade was enough to fool investors. By the time people caught on, the dev wallet had already cashed out 1,300 BNB, worth approximately $430,000. More losses could still be on the way.
No sooner did MicroSHIBA fall to earth did another half-dozen bot-driven projects fill the void. Chief among them this week is SPON (CCC:SPON-USD), a new token from Singapore-based Sponsee.
On its surface, Sponsee looks much like Hello Pal (OTCMKTS:HLLPF), a Canadian social media firm that dove into cryptocurrency after its core business stumbled. In the case of Sponsee, the social media platform app has barely made it off the ground after a year of development.
But that hasn’t stopped Sponsee from blanketing Reddit with sales messages.
This time, Redditors don’t seem as impressed.
“4k likes but hardly any interactions,” observed one Redditor. “So many fake comments,” wrote another.
I’m not suggesting that Sponsee is doomed to fail. Other pumps have notched gains during the first several days of trading, and some like Sonar (CCC:PING-USD) then go on to rise 75-fold. But given Reddit’s frosty reception, I wouldn’t bet too heavily on this crypto Moonshot.
The world occasionally throws a curveball too… in this case, it’s Mr. Goxx, a crypto-picking hamster that has outperformed the S&P 500, Cathie Wood and Warren Buffett.
Goxx Capital started on June 12 with 326 EUR. By Sept. 27, the light-hearted project had gained 19.41%, or 63.27 EUR.
Redditors, however, might have had the last laugh. On Tuesday, investors sent prices of the unrelated Hamster Token (CCC:HAM-USD soaring. The token is now up 140%, worth $3.8 million more than where it started.
Hamster Token’s long-term merits might seem questionable. The token was bot-spammed onto virtually every crypto-related Reddit board at launch, and a quick check of the owner’s wallet shows a history of steady HAM withdrawals. It’s a classic sign of yet another day at the Spamcoin office.
But whether or not HAM will rise in the short term probably depends more on Mr. Goxx. That’s because if the hamster can repeat his summer success this fall, you can be sure that the media circus (and Redditors too) will hop right back on the bandwagon.
Bottom line: stay away from obvious Reddit pumps like Sponsee. And exercise caution with short-term plays like Hamster Token that depend on uncontrollable factors.
Digging for Crypto Gold? How About BNB Picks & Shovels Instead.
|6,500||The number of tokens on the Binance blockchain in January. Nineteen — 0.4% — had a market capitalization above $1 million.|
|1.2 million||The current number of Binance tokens. Today, only 0.015% have a market capitalization above $1 million.|
|-65%||The January price decline of Alpha Token, the largest non-peg Binance token.|
|700%||Return on Binance coin (BNB), the Binance ecosystem’s native token, during the same period.|
Crypto Movers and Shakers
The Chinese government has often banned things that Americans often take for granted — Facebook, Spongebob Squarepants, and the letter “N.” Now they’ve also banned cryptocurrency. Here’s how the ban could play out for Ethereum, according to Ian Bezek.
Hashbon and Hashgraph (CCC:HBAR-USD) might sound similar. But Alex Sirois is warning readers to stay away from the latter. Here’s why Hashgraph could be swallowed in a sea of competition.
With 2021 already three-quarters over, some forward-looking investors are already looking into next year. And right on cue, Mark Hake shares his seven favorite DeFi picks that should do well over the next year (Hint: Algorand makes his list too).
Generation Reddit’s Risk-Taking
Last week, SEC chairman Gary Gensler suggested college students should start saving early and “earn maybe 8%.”
The reaction from the crypto community, of course, was a mix of disbelief and annoyance. The last time the U.S. discount rate was that high, Ronald Reagan had just become president, and the average in-state college cost less than $1,500 per year.
“Should have said OK boomer,” commented a Redditor. “What’s a savings account?” quipped another.
Today, even the most aggressive long-term predictions by J.P. Morgan place expectations at 4.5% growth. At that rate, most young investors will need to save 15-20% of their income to afford retirement, provided that government shutdowns or another financial crisis don’t wreck markets first.
Faced with such long odds of success, it’s no surprise that many Reddit-based investors have decided it’s better to shoot for the moon instead.
If you’re thinking of doing the same, use my Momentum Master strategy to determine when to lock in gains and sell your holdings (In other words, don’t be greedy with Spamcoin gains). And above all, only buy high-quality Moonshots if you’re in it for the long haul.
FREE REPORT: 17 Reddit Penny Stocks to Buy Now
Thomas Yeung is an expert when it comes to finding fast-paced growth opportunities on Reddit. He recommended Dogecoin before it skyrocketed over 8,000%, Ripple before it flew up more than 480% and Cardano before it soared 460%. Now, in a new report, he’s naming 17 of his favorite Reddit penny stocks. Claim your FREE COPY here!
On the date of publication, Tom Yeung did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Tom Yeung, CFA, is a registered investment advisor on a mission to bring simplicity to the world of investing.