- Altcoins like safemoon and dogecoin serve little purpose and are highly risky, analysts said.
- Safemoon bills itself as a decentralized finance token that is set to skyrocket in price.
- Yet analysts warn it could be a “pump and dump” scheme that hurts late investors.
Investors should be very wary of alternative cryptocurrencies such as safemoon and dogecoin, many of which are unregulated, highly volatile and could cause buyers to lose all their money, analysts have said.
The breakneck rally in various altcoins has drawn in an army of retail investors, who are hunting for the next bitcoin. Dogecoin had rallied 470% in the month to Friday. Safemoon, a token launched in March, had risen 1,320%, boosted by celebrities such as Jake Paul and Lil Yachty.
“Gains are being fueled by frenzied chat across social media with influencers jostling for position to push their favoured coins,” said Susannah Streeter, market analyst at investment company Hargreaves Lansdown.
“But like a slot machine, the coins being pushed into circulation are very much a speculative bet and investors should only dabble if they have money they can afford to lose.”
Both dogecoin and safemoon have cooled since touching all-time highs earlier in April, with trading volumes down sharply. A plan by dogecoin supporters to send the token soaring even higher recently faltered.
Regulators stress that anyone investing in cryptocurrencies is taking a risk and should be prepared to lose all their money, given that given that the digital assets do not have inherent value like stocks or the uses of the dollar or gold.
But analysts say buyers might want to be more cautious with some cryptocurrencies than others.
Whereas bitcoin has drawn in big institutions and its market value is more than $1 trillion, relatively little is known about many altcoins that have been soaring in price.
The creators of safemoon bill it as a decentralized finance token that is destined to rocket in price. A key part of its design is that it penalizes people for selling with a 10% charge, half of which is distributed back to holders and half of which is burned, according to its website.
Edward Moya, senior market analyst at currency platform Oanda, said: “Many view it as a pump-and-dump coin. Safemoon’s initial buzz started off as many anticipated it will have a similar rise like dogecoin. It seems unlikely safemoon will ever make it to the moon.”
Streeter said the token’s set-up “sound[s] fresh alarm bells.” She said “its model appears to be geared towards helping early holders of the currency get rich, as others pile in after them, pushing the price up further.”
She added: “Traders buying in late with expectation of celestial rewards are likely to be sorely disappointed when the price falls back to earth with a bump.”
Safemoon’s creators did not respond to requests for comment.
Bobby Ong, the co-founder of crypto analytics…