The sharp increase in interest in the topic of earnings on cryptocurrencies from a wide audience predictably provoked the emergence of pyramid schemes disguised as completely legitimate and rapidly developing cryptocurrencies. Naturally, with 100% accuracy, it can be said that a certain cryptocurrency is actually a pyramid, it is possible only after its obvious collapse, however, some signs should already alert any cautious investor. We will talk about them.
How to recognize a pyramid on the example of cryptocurrency OneCoin
The company conducts the most powerful PR campaign in social networks. There are advertised communities, videos published on YouTube and other platforms (which is typical, comments are disabled under them), company representatives speak in different cities before a real audience, talking about how to get money using OneCoin …
To start making huge money, according to representatives, you need to buy a training package that costs from 100 euros to several thousand and even tens of thousands of euros – depending on the level. Anyone who is accustomed to contenting himself with little and who is satisfied with the purchase of one apartment is enough to buy the cheapest package. And if you want to fly abroad on your own plane every month, you will have to fork out for higher-level packages.
Promises of such kind are an alarm bell for a potential investor. People familiar with the crypto-market should be alerted by two factors.
1. Assurances from company representatives that Vankoin will receive the same popularity as Bitcoin. This is without introducing innovative developments that would distinguish this cryptocurrency from dozens of others, without introducing any innovations in principle. The question is, how can OneCoin become popular?
2. Absence of OneCoin on the leading cryptocurrency exchanges. How is it possible that currency that promises to beat Bitcoin is not in leading exchanges? It is not clear.
All of the above is generously decorated with photographs of expensive cars and other markers of “luxurious” life. Of course, this factor in itself does not mean anything, but in the field of cryptocurrency, such advertising is not particularly common, while such methods of influencing the human psyche are used in most financial pyramids.
How to recognize a pyramid on the example of BitConnect cryptocurrency
Another worrying cryptonome is BitConnect. In a matter of time, in less than a year, it has risen in price from $ 0.14 to $ 277 and currently has a capitalization of almost $ 600 million.
Nevertheless, we have not enough information about this cryptocurrency. As in the case of OneCoin, there is no reason for such an increase in the price of this currency. It does not offer fundamentally new technologies that cryptoteers need, it is generally no different from many unknown forks, and it is not clear why it, and not dozens of others like it, jumped so high. There is one opinion when you are trying to explain this phenomenon – the BitConnect hypothesis suggests itself artificially.
Confirms its close study of the exchanges where the coin is found. Significant turnovers are observed on stock exchanges that are not particularly known or trusted or did not use (like the BCC Exchange, for example), while there are a few “bitconnects” on more or less proven resources. Usually, on the contrary, promising coins are mainly traded on proven exchanges, and little-known people accidentally fall from the hands of a few people who want to take a chance on a new resource. It seems plausible assumption that such exchanges were created specifically to maximize BitConnect to promote in the eyes of investors. The scheme is approximately as follows.
A person learns that there is such a BitConnect cryptocurrency, the price of which is actively growing. Therefore, this is a great option for investing money. A person watches for a while the growth rate, makes sure that the currency you need to buy, invests and watches with pleasure as the price continues to rise. Perhaps he informs others about such a profitable option or writes, for example, a review.
People who want to make money on investments in cryptocurrencies do not always understand them and often are guided by the most unreliable sources when making decisions, if they clearly state where it is profitable to invest. And if it is said that it is profitable to invest in a certain BitConnect, many will do so, without really understanding the reasons. The exchange has fulfilled the task of the currency being quoted – the depositors are coming, and why it is being quoted is the tenth thing.
How promising are the pyramids in the cryptocurrency market?
Above, we have considered only two possible schemes for the functioning of financial pyramids under conditions of a cryptographic market. There may be others, and their originality will depend only on the imagination of the creators. It is impossible to describe all the options. For example, referral programs that are used by quite reliable developers can be taken as the basis for building a pyramid.
Partially this scheme is implemented in the same OneCoin, the investor can sell the “training packages” to others for the greatest possible benefit. Will sell more – get more. Taking into account other circumstances, people familiar with MMM and people who are confronted with network marketing should, in theory, understand where the wind is blowing, even if they have not heard anything about cryptocurrency in life. By the way, the notorious Sergei Mavrodi is also not lagging behind the progress. He organized in developing countries MMM Global, where he used cryptocurrencies. The project exists to this day and attracts a huge number of investors who have not heard about the activities of Mavrodi in the CIS.
Today, fraudulent enterprises in the cryptosphere are quite common, it is a fact. Its advantages – decentralization and anonymity – make it stronger and more vulnerable for scammers. However, the fundamental premise of cryptocurrency pyramids, concerning the rapid growth of the cost of cryptocurrencies offered by them, often rests on the basic behavioral model characteristic of the cryptocurrency market.
As practice shows, at different stages of increasing the cost of a cryptocurrency attracts different categories of investors. When it takes off sharply, for example, from $ 0.1 to $ 3, many people buy it, because from a financial point of view it is not difficult to do this. In this case, the risks are not particularly thought of, because they are insignificant against the background of the hypothetical benefit that can be obtained if the cryptocurrency fires. When the price rises, say, from $ 3 to $ 50, coins are bought mainly by those who are afraid not to have time, as in the case of Bitcoin, when at a certain stage the entry threshold became too high for most applicants. Further, when the price makes a sharp jump upwards – mostly those who are set up for long-term investments and in one degree or another possess the skills of a professional investor (or use the services of such specialists). All serious investors, as a rule, assess the prospects of the currency in the first stages. Currencies that have a chance to “shoot”, it was then and therefore become known, at least in narrow circles, that professionals notice in them a specific value and potential for growth. They are beginning to be discussed, later they are beginning to appear on proven exchanges and more and more market participants are beginning to be considered as a promising object for investment.
With the artificially quoted currencies, nothing like this happens from the beginning, investors understand that this is another trick, and they forget about them, because there is no reason to talk about any reasonable value and potential for growth. Thus, even if the financial pyramid disguised as a cryptocurrency achieves some success in attracting users in the initial stages, then as the cost of entry increases, sooner or later there comes a time when further growth must be ensured by large investors who prefer to stay away from it .
Perhaps that is why we still have not seen any truly large-scale and influential pyramids in the cryptocurrency market and, most likely, we will not see it in the near future.