This 35-Cent Crypto Could Sink Robinhood

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Lorde Edge, the Master of Crypto

a digital graph overlayed over hands typing and a pile of crypto coins

Source: Shutterstock

On Sunday, Tesla CEO Elon Musk changed his Twitter handle to Lorde Edge, an anagram for “Elder Doge.”

The Twitter cryptoverse naturally went wild. By Monday, a Lorde Edge (CCC:EDGELON-USD) token had shown up on crypto tracking site CoinMarketCap, reaching a $25 million theoretical market value almost instantly (Anyone who feels they missed out can still check out the other 81 “Lorde Edge” tokens on the Binance Smart Chain).

Meanwhile Elonomics (CCC:ELONOM-USD), another Musk-themed coin, rose 2,000% within seconds. These days, it seems as if proximity to the self-proclaimed Dogefather is enough to turn any cryptocurrency into digital gold.

But behind the bonanza lies a growing prevalence of SQUID-type scams. Lorde Edge investors have already complained about the difficulty of selling the token, while independent audits of Elonomics show telltale signs of a honeypot scam.

Though Mr. Musk seems to be having all the fun, it’s the dev teams using his name getting the last laugh.

An illustration of an astronaut holding a balloon that looks like the moon.

Source: Catalyst Labs / Shutterstock.com

The Spamcoins and Sh*tcoins of Today

Shiba Inu (CCC:SHIB-USD)… SQUIDFeed Every Gorilla… meme coins can often seem like a random mix of names you’d sooner find in a zoo. And of the thousands of tokens minted by the day, only a handful go anywhere.

That’s why top crypto investors like InvestorPlace’s Charlie Shrem focus on high-quality coins with the potential to change the world. Why waste time on ugly copycats when shining stars like Bitcoin (CCC:BTC-USD) and Chainlink (CCC:LINK-USD) beckon?

But some lucky investors have also gotten rich from low-quality meme tokens. To find the most promising among these blockchain beasts, I’ve long used a combination of my Momentum Master strategy and a 5-point checklist. That combination picked out Dogecoin (CCC:DOGE-USD) at 1 cent and Shiba Inu before its latest +400% run.

But there’s one problem to this method — it only sees cryptocurrencies after a 20%… 100%… or even 500% initial gain (That’s +1 more point to Charlie’s team).

That’s why InvestorPlace CEO Brian Hunt asked me an honest question last week:

Can you predict the next meme coin before it initially goes up?

Has your career ever flashed before your eyes? That’s the kind of question that makes market commentators set off smoke bombs and bolt for the nearest exit.

Predicting the Next Meme Cryptos

Fortunately I didn’t have to start a small fire to obscure my escape; I’m happy enough to give a clear answer.

“No.”

Much like internet memes, crypto memes start life pretty much the same: undistinguished and unknown. Many are copies of other tokens with only the names and logos changed out.

That’s why development teams tend to launch dozens of identical tokens at a time. The ones that gain initial interest will receive a dedicated Twitter profile, while those that fail are quietly abandoned.

Consider Axienomics, Monday’s No 3. top-trending token on CoinMarketCap. A quick check on crypto-tracking website Token Sniffer shows no fewer than 20 tokens that are virtually identical in code… 7 of which are flagged as scams. Some, such as the earlier-mentioned Elonomics, send users to half-finished sites with placeholders for Twitter links. Others like Fomo Flokinomics don’t even have a website yet.

A screenshot of a Twitter page showing that there isn't an account called @ElonomicsOfficial.

Source: Twitter.com

These aren’t the animals you’d find on Noah’s Ark; they’re more like glued-together zombies from Dr. Frankenstein’s lab.

Picking the Next Meme Token

That’s why I largely avoid recommending picks from the massively growing number of lookalike tokens. Bots and interparty sales can easily create an illusion of success, even if temporarily.

Crypto.com Coin (CRO)

However there is one exception: Crypto.com Coin (CCC:CRO-USD), the native token for the Crypto.com exchange.

In the past month, CRO has risen 105% on the back of retail investor interest. Today, the ticker rivals Ethereum’s for message volume on popular investing forum StockTwits.

“HOLD… 👏🏻 💰Long term” wrote one user. “Just got my crypto card today in the mail… but with this dip might have to upgrade tonight,” said another.

Behind the minimal due diligence however, lies a promising meme token on the rise.

The Rise of a DeFi Platform

CRO is an Ethereum-based token used to power the Crypto.com Pay mobile payments app. Merchants can opt to receive payments in CRO, while investors can use CRO’s staking mechanism to park spare cash and earn 20x higher yields. In other words, CRO has significant real-world utility.

Its parent company has also steadily climbed the ranks of coin exchanges. A well-run advertising campaign briefly pushed the Crypto.com mobile app to the No. 5 most downloaded on the Apple Store in October, and it remains in the Top 50 today.

Crypto.com has also become a popular choice among those seeking exclusive credit cards. Their prepaid all-metal cards might seem like a gimmick, but even the most elitist spenders will admit it’s hard to find any other card that will let you stake crypto at the same time.

As Crypto.com rolls out greater functionality, investors should expect CRO to keep climbing.

Giving Robinhood a Run for its Money

All of that spells trouble for competitor Robinhood (NASDAQ:HOOD). The commission-free app has since fallen out of the top-100 most downloaded apps, according to data aggregation site SensorTower. Revenues from its crypto trading business also collapsed 77% to $51 million in Q3 — not surprising considering HOOD’s lineup of 7 tradable cryptocurrencies hasn’t expanded since 2018. On Tuesday, the firm’s chief operating officer Christine Brown added that her firm was in no rush to add new cryptocurrencies to its trading platform.

Meanwhile, Crypto.com now supports over 400 different coins — almost four times more than Coinbase and 60 times more than Robinhood. Its user base hit 10 million in February and may have exceeded Robinhood’s 18.9 million active users since then.

That’s put Robinhood in an awkward situation. On Tuesday, the HOOD team launched its long-awaited crypto wallet to minimal fanfare and significant technical issues. Users reported issues transferring money in and out, sending HOOD stock down 6%. The company also revealed that a data leak may have exposed the private information of 7 million users.

At this rate, Robinhood doesn’t even have to worry about Crypto.com. HOOD’s worst enemy might just be itself.

An illustration of an astronaut hanging off a moon-like arc.

Source: Catalyst Labs / Shutterstock.com

Too Big, Too Fast

Two weeks ago, I wrote that it was time to take 50% profits on both Shiba Inu and Solana (CCC:SOL-USD). Though the two cryptocurrencies are as far apart in quality as you can get, they had one thing in common:

They grew too big, too fast.

No one ever rings a bell at the top of the market. But we can get close.

  • Shiba Inu. Moonshot’s timing was oddly perfect. October 27 marked the highest point SHIB would ever reach; prices are down 36% since.
  • Solana. I made the call ten days too early — SOL would climb to $260 by November 7 before shedding a third of those gains.

A chart showing the performance of SHIB, SOL, BNB, ETH and DOGE since Oct. 27.

Essentially, as cryptocurrencies grow larger, they tend to act more like megacap stocks (or celestial bodies) where a kind of “gravity” seems to pull them towards a central price.

Of course, the real reason behind such behavior isn’t so much astrophysics as it is economics. In our world of finite means, nothing can become infinitely valuable; humans only generate around $85 trillion of GDP per year.

That means few assets ever sustain extreme valuations forever. At a market cap of $75 billion, Solana is now worth fifteen times more than the entire secondary market for fine wine, according to Morgan Stanley. And if Shiba Inu were valued as a bank, it would be the twelfth largest in the U.S.

Much like Bitcoin, these mega-cap cryptocurrencies have turned into buy-and-sell coins, rather than buy-and-hold.

A chart comparing the price of Bitcoin to the SMA-50 indicator.Tactical BTC trading has outperformed buy-and-hold by a 1.6-to-1 margin this year.

What Makes a Good Spamcoin?

Astute readers will wonder, “if it takes less than $10 to launch a Binance token, why are there millions (and not billions) in existence?”

That’s because the most successful tokens still require some financial investment on the developer’s part. Social media followers cost money, whether through hiring a social media manager or buying up bots. For example, half of meme token BunsCake’s Twitter followers are somewhat nonsensically from Turkey, according to analysis website FollowerWonk.

The biggest financial investment however, comes from creating a liquidity pool (LP). These pools are what make a coin initially tradable, and can require anywhere from $100 to $50,000 to fund. These liquidity pools also serve a dual purpose, allowing developers to eventually cash out.

In the end, the lesson is still the same: winning tokens are only obvious once they start taking off. Those who buy them ahead of launch are simply playing the meme lottery.

P.S. Do you want to hear more about cryptocurrencies? Penny stocks? Options? Leave me a note at moonshots@investorplace.com or connect with me on LinkedIn and let me know what you’d like to see.

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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.


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