One of the most lucrative opportunities that people do not capitalize enough on is short selling. It is possible through many exchanges to go contrarian on certain cryptos, and doing so can be very profitable. The recent spike in the crypto market has carried many meme cryptos and pointless projects to sky-high valuations. These are among the top cryptos to avoid going long in the current market but also provide excellent shorting opportunities.
Of course, many fear that going short on meme cryptos is very risky since it can spike suddenly. However, diversifying your positions across many overvalued projects with no leverage can substantially lower that risk.
Here are three cryptos to avoid:
Rocket Pool (RPL)
Rocket Pool (RPL-USD) is a decentralized protocol that allows anyone to stake in Ethereum (ETH-USD) 2.0 without running their own validator node. The project has been on a tear, surging from $8.8 in May last year to nearly $60 in April this year, a whopping 580% increase. However, the momentum has faded, as RPL has dropped to around $37 at the time of writing. I believe this is a sign that the market is starting to realize the flaws and risks of this crypto project and that RPL is a sell.
One of the main arguments against Rocket Pool is its smart contract risk. The protocol relies on a complex set of smart contracts to manage the staking process, the rETH token and the RPL governance token. These contracts could have bugs, vulnerabilities or unforeseen consequences that could compromise the security or functionality of the protocol. For example, in October 2021, Rocket Pool had to delay its launch due to a critical bug that was discovered in its codebase.
Moreover, Rocket Pool’s supply inflation doesn’t make it a good long-term investment. The protocol has no max supply. According to Coincodex, the annualized inflation rate of RPL is 89.45%, which is extremely high compared to other crypto projects.
Therefore, I think Rocket Pool is a bearish bet that investors should avoid or sell. Other liquid staking providers, such as Lido (LDO-USD), Frax (FRAX-USD) or StakeWise (SWISE-USD), also offer very competitive rates with less strings involved.
4-CHAN (4CHAN)
4-CHAN (4CHAN-USD) is another cryptocurrency that has been soaring recently but with a massive caveat. This token is based on the infamous 4chan website, which is known for hosting controversial and offensive content. The token has no real utility or value proposition other than to appeal to the 4chan community and generate hype.
However, hype alone is not enough to sustain a cryptocurrency project in the long term. 4-Chan crypto has several red flags that make it a risky and unattractive investment. Here are some of the reasons why I would avoid this token at all costs:
For starters, 4-Chan is extremely inflationary and prone to dilution. The token has no mechanism to control the supply, such as burning or staking, and the token also has no governance or community involvement, which means the holders have no say in the project’s future direction.
Moreover, 4-Chan crypto is vulnerable to manipulation and exploitation by the contract creator, who can modify the smart contract at any time. According to Gopluslabs, the contract creator can disable selling, change fees, mint new tokens or transfer tokens without any restriction. This poses a huge security and trust issue for the token holders.
Pepe (PEPE)
Pepe (PEPE-USD) is another meme crypto that has been rallying recently. It is up 44% this week, and I believe it will likely cool off substantially from here, making it one of the cryptos to avoid. This is an ERC-20 token with no functionality except transactions. It doesn’t have any taxes, but again, it is on the Ethereum network, and gas fees can be high.
On the other hand, two Binance wallets hold over 21% of the token’s entire supply. That is a big red flag, considering Binance is under strain from U.S. regulators, making it one of the top cryptos to avoid.
On the date of publication, Omor Ibne Ehsan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
