Becoming a paper billionaire in one minute or less
(or your money back)
*nothing here is financial advice or life advice or any kind of advice. ever. why would you take advice from a penguin with a tie stuck in the 1980s?
I’ve been spending some time identifying scam tokens and malicious contracts on ethereum lately. This had lead me to consider how tokens can be evaluated.
Which of these is a better investment?
A token with a $1 billion market cap and low volume
A token with a $20 million market cap and high volume
Neither, it’s all a scam
If you answered (3), congratulations! Welcome to crypto.
Seriously though, if you’re ever bored, monitor new pairs on dexscreener and see how many are flagged as scams.
https://dexscreener.com/new-pairs
What about (1)? It’s a $1 billion market cap. That’s almost as good as AAVE in Oct 2023.
@DefiIgnas touched on the idea in this tweet. Building off of that thread:
Mint your ERC20 SCAM token. Set the initial supply to 1 billion tokens
Set up a V2 liquidity pool on Uniswap with SCAM and USDC.
Provide the initial set of liquidity to the pool by depositing 1 SCAM and 1 USDC
You’ve just set a market price of $1 for 1 SCAM token.
There are 1 billion SCAM tokens, each worth $1. SCAM token has a $1 billion market cap.
We have won. We have reached the moon. 🌝 🌚 🌙 🌜 🌑 🌕 🌛 🌓 🌒 🌗 🌘 🌔 🌖
Feels like a scam, doesn’t it? Hard to pinpoint why. Maybe the name of the token?
There’s no demand for SCAM token, so the $1 price arbitrarily assigned to it by pairing it with 1 UDSC is meaningless. Just because you set a price doesn’t mean someone will pay it. Which explains why my rendition of Cézanne’s The Card Players hasn’t sold yet.
If there were actual market demand for SCAM token, we’d have more confidence that the price was somewhat genuine. Markets are supposed to set prices. How can we measure this demand? What about trading volume? Maybe option (2) was better. $20 million cap but with high volume. That must be the ticket.
Except, you know
oh…
It’s not just tokens (or traditional securities). 0xHildobby showed that NFT markets are rife with wash trading.
So market cap can be misleading, volume can be manipulated. How to actually judge if a token has any value?
The price of an object can be fleeting, and subject to the tides of time. As our dear friend Rudy explains here starting at 0:26.
What’s the moral here? Finance and crypto have more fraud, scam, and misleading numbers than anything I’ve ever seen (and I spent some time in advertising). For example, here’s a token on the first page of dexscreener with $30k volume and a $154k market cap.
I’m not saying it’s scam. But it’s been flagged by security providers as showing some warning signs.
and all of the pair’s liquidity appears to be held by one provider…
Again, not saying this is a rugpull. Just that you’re probably standing on a rug, and only one person appears to be holding the rug. 🤷♂️
As time goes on, we’ll probably take a look at some famous malicious smart contracts and see what warning signs were present in the code. This stuff is fun to study, even if you have no interest in “investing” in this space. Again, option (3) was the wisest of the bunch.