While few sectors offer the exponential upside potentiality of the cryptocurrency market, not every idea is a winner, which brings us to cryptos to avoid. I’m not here to bash any pet projects – you do what you want with your money. That said, you’ve got to understand the risks.

Virtual currencies – no matter how much attention the top-tier coins and tokens have received – are incredibly risky. Due to the lack of extensive oversight and regulation, cryptos can be wildly volatile. That’s true to the upside as well as to the downside, which makes the sector difficult to navigate.

By logical deduction, the further you move away from the established names, the likelier it is that you’ll encounter problems. For example, it’s not that uncommon for speculators to lose it all because of rug pulling in the crypto space and other scams.

In this wild world, you’ve got to look out for number one. With that in mind, below are cryptos to avoid.

Shiba Inu (SHIB-USD)

One of the most popular virtual currencies, Shiba Inu (SHIB-USD) commands a loyal investor base. For those who know what they’re doing, SHIB could be intriguing. However, just like a financial advisor wouldn’t recommend forex trading to a newbie, I can’t in good conscience say that you should put serious money to work with Shiba Inu.

Yes, it’s ranked as number 11 in terms of market capitalization. That’s an impressive achievement, full stop. However, the problem is the dramatic variance in movement. For example, the gap between its 52-week high and low stands at nearly 700%. If you were on the wrong end of this trade, you would be down more than 87%. It would be extremely difficult to recover from such a loss.

It’s also worth pointing out that the high-low gap during the past 30 days comes out to nearly 59%. That’s great if you’re a disciplined veteran trader. But if you were on the wrong end of this transaction, you’d be looking at a 37% loss.

With technical analysts warning about a possible breakdown, SHIB is one of the cryptos to avoid for beginner investors.

Decentraland (MANA-USD)

During the wild days of 2021 when virtual currencies seemingly couldn’t do no wrong, I owned some Decentraland (MANA-USD). I can’t really explain why I bought it because I just don’t remember the details. Anyways, the price soared and I felt it was time to exit. While MANA is connected to the metaverse via its virtual reality platform, the concept just seemed bizarre (once I realized what was going on).

Again, for those who know what they’re doing, MANA could be an intriguing trade. But even veteran traders are probably interested in Decentraland for quick scalps. According to CoinMarketCap, MANA’s all-time high was a few cents shy of $5. At the moment, the coins go for less than 50 cents. Looking at the technical profile, it’s doubtful that MANA can get back to its former peak.

Further, with the broader ecosystem encountering a significant correction, Decentraland is suspect. If the weak hands are exiting out of the top-tier coins and tokens, that presumably leaves MANA with little chance. I would take the prudent approach. It’s one of the cryptos to avoid.

Audius (AUDIO-USD)

A few years back, I remember Audius (AUDIO-USD) came across my radar as a highly touted virtual currency. It’s a fascinating concept. Per CoinMarketCap, Audius represents a decentralized music streaming protocol. It was “launched to remedy the inefficiencies of the music industry, which is plagued by intransparent music rights ownership and intermediaries standing between artists and their audience,” states the crypto-centric website.

To make a long story short, Audius proposed a holistic way where creative and groundbreaking musicians can be rewarded for their work. At the same time, the fans carried leverage in this ecosystem, thus cutting out the complex relationships imposed by the contemporary music industry. It had the potential to be disruptive. Unfortunately, investors lost money and that’s really the bottom line here.

You can argue all day that we need more decentralization in our lives, not less. Maybe so. However, if Audius investors’ returns are the only thing being disrupted – and not in a good way – AUDIO the token stands little chance of gaining credibility. Given the current situation, I think it’s one of the cryptos to avoid.

Hex (HEX-USD)

Designed in December 2019, the Hex ecosystem bills itself as a certificate of deposit on the blockchain. Per CoinMarketCap, “HEX is designed to be a store of value to replace the Certificate of Deposit as the blockchain counterpart of that financial product used in traditional financial markets.”

The crypto resource also points out another intriguing attribute of the ecosystem. “HEX allows a user to stake his or her HEX coins for a share of the new HEX coin issuance, or inflation and contains features designed to incentivize behaviors that encourage price appreciation and disincentivize behaviors that encourage harm to the price.”

Notably, the Hex smart contract “penalizes stakers for ending their stake early and rewards them for staking larger amounts of HEX for longer periods.” That’s the opportunity and the risk. On one hand, should more people believe in the project, the staking process would yield greater financial rewards.

However, if Hex loses favor among investors, that’s it. Your staking could potentially expose you to deeper net losses. Because of the complexity of this project, it’s safe to say that for newbies, HEX is one of the cryptos to avoid.

Floki (FLOKI-USD)

I have mixed feelings about Floki (FLOKI-USD). As a popular meme coin, it has significant potential, if only because its adherents don’t take “no” for an answer. Perhaps in any other circumstance, a niche project focused on the name (and breed) of Elon Musk’s dog would be derided as ludicrous. However, when you’re in the blockchain, that’s a good reason to justify a $1.6 billion market capitalization.

Now, I understand that Floki involves much more than just the name. Proponents will argue that Floki offers utility in several avenues, including the metaverse and DeFi applications. Nevertheless, the point remains that this digital token has the same market value as actual enterprises – enterprises that generate earnings and hire people. Stated differently, Floki is where it is largely because people believe it will move higher.

To be fair, this methodology – generally known as the greater fool theory – can be a powerful catalyst in the blockchain. However, it also necessarily means the valuation of Floki is tenuous. It will rise until it doesn’t. For that reason, it’s one of the cryptos to avoid for new investors.

Terra Classic (LUNC-USD)

Originally undergoing its development process in January 2018, Terra Classic (LUNC-USD) initially set off as a blockchain protocol that uses fiat-currency-backed stablecoins to power price-stable global payments systems, according to CoinMarketCap. It aimed to provide price stability and trust (via the fiat peg) while offering lightning-quick transactional settlements.

What made Terra distinct (if not outright unique) was that a complex algorithm undergirded the pegging protocol. That all sounded fine and dandy until a catastrophic de-pegging occurred. Essentially, this development blew up the underlying blockchain ecosystem. It also cost investors billions of dollars. Unfortunately, when crypto projects go bad, there’s little to no recourse.

Following the disaster, the original Terra blockchain became known as what it is now, Terra Classic. Despite the turmoil and reputational damage, people still trade the asset. Given the ultra-low price of LUNC – trading for fractions of fractions of pennies – it continues to attract speculators.

My idea? Consider LUNC one of the cryptos to avoid. While the original idea was innovative, it proved unfeasible. So, there doesn’t seem to be much point with Terra Classic other than wild speculation.

FTX Token (FTT-USD)

You would think that bankruptcy and massive fraud would be enough to scare people away from crimson-stained cryptocurrencies. However, FTX Token (FTT-USD) – which is tied to the defunct FTX platform – still trades in the blockchain ecosystem. Per CoinMarketCap, the price at the time of writing is $1.47 per token. It boggles the mind.

Then again, investors in the fiat world have also speculated on similar circumstances. For example, when cosmetics giant Revlon filed for bankruptcy, many traders bought into the stock. Of course, it’s a risky idea because, under a bankruptcy proceeding, common stock shareholders are the last in line to receive anything in a liquidation. Still, if a bankrupt public company can work out a deal, the shares could skyrocket.

That may be the only reason why some choose to “invest” in FTX Token. However, CoinMarketCap offers a clear warning: “The FTX bankruptcy proceedings are underway. The FTT token no longer has any use and may be liquidated by the estate to pay creditors. Please proceed with caution.”

You can guess my stance. It’s one of the cryptos to avoid.

On the date of publication, Josh Enomoto 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.