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Why Research On Cryptocurrencies Is Important

A few thoughts on "Bag Bias" and other problematic stuff

I wanted to write a blog post about this matter since quite some time, actually since shortly after I entered crypto. Correction, since shitcoins became a thing. Why? Because soon after I entered crypto, I realized that there are lots of crooks and frauds who tell you anything to make a profit. After all, this is about money, and where money can be made, you will also find human waste which tries to separate you from yours.

This article should serve as a guideline for noobs who don't have years of experience with scams and how to spot them. So, let's dive right into it!

What does DYOR mean and why is it important when dealing with cryptocurrencies?

DYOR means Do Your Own Research, and it means (or should be understood as, in the realms of cryptocurrencies) trust noone. Nobody here has any reason to recommend you anything you can turn into a profit. To be fair, there are certain players who promote cryptocurrencies they believe in, but for the sake of your own (financial) safety, just assume that everybody is after your money.

Luckily, I implemented this attitude quite early, which helped me a lot to get around most scams. Implementing such an attitude generally helps you to stay safe in Cryptoland. Apply it to what you read (new coins being promoted / touted by "influencers") and also to your security: treat any aspect of crypto like everybody is here to steal your money. While crypto is – like everything in life – not actually that binary, it's a good starting point to assume it was, at least until you have enough own experience to distinguish between the nuances.

"Reasons" to not Do Your Own Research

There are two answers to that, both going in opposite directions. The short answer is: none. There are no reasons to be negligent with your research and just listen to what someone else tells you. Remember (and I will probably state this a few more times throughout the article): there is no free lunch. Nobody has any reason whatsoever to help you make a profit. If there was a profit to be made, they'd take it themselves. This is especially true for:

I will cover these points one by one, explain where to be careful, how to debunk the bad actors and how to prevent getting scammed.

Now you know that there are no reasons to research your stuff. But there are "reasons", namely laziness and greed. In markets like the cryptocurrencies, greed is a major, omnipresent factor. Wherever you look, if you look closely, you will find greed. And if you're honest with yourself and / or have a good self conception, you will realize (e.g. while trading) that certain situations like an emerging bull run will trigger greed in you, too. This is only natural, and this is exactly how these markets work, so there is basically nothing wrong with that. It's just important to understand and to acknowledge it. If you're able to do this, you already have a good toolset to help you get along.

The other "reason", laziness, is a human property like greed, too. How distinctly these properties are developed differs from person to person. But like a slide control they define your success in cryptoland. The good thing with sliders is, you can (learn to) use them to control whatever they regulate. I will cover that later in the article.

What happens if you're negligent?

The answer is simple: you will lose your money, one way or another. If there's one thing for certain: scammers in cryptoland are clever. And creative. I've seen some of the most sophisticated scams taking place in cryptoland. Always keep in mind: there are always people who are more intelligent than you, and they might use that to separate you from your money. People got their identity stolen for a few thousand US Dollars. So, don't assume you're not a "worthy" target.

I will give you a few examples of successful scams, some being very successful, some not so much. But all share one thing in common: it's preventable to fall prey to them if you use your brain and do some research.

1. BitConnect: ~2.5 billion USD scammed

BitConnect was a HYIP (high yield investment program). They had their own cryptocurrency (which was only traded at their own exchange with no way out for any paper profits, ensuring they will keep all of the money). Some people allege that it wasn't even an actual cryptocurrency, but mere database tokens (money which only existed in their database with no real cryptocurrency network behind it).

On YouTube, many many so called influencers touted that project, and the insane amounts of money, they allegedly made. This derailed pretty quickly, and people like Trevon James, CryptoNick, Craig Grant and Ryan Hildreth promoted the project heavily on YouTube, leveraging their influence / subscribers to fool even more to sign up on that scam.

2. Telegram scams in different variations

No way near as evil as BitConnect, but still annoying. The scammers go for much smaller amounts, and they're rarely successful. But you still don't want them to succeed with their scam, especially not with you being the victim. Regarding the lack of success: I know that because I got like 2-3 of them to talk to me about why they do this, where they come from and how much they make with these kinds of scams. For the most part, they're poor, desperate people from developing countries, and while this is all sad (once I sent one of them 50 bucks because I somewhat felt sorry for him – as a thank you, he tried to get me to install a malicious Chrome extension ^^), you still don't want to lose money on them.

The scams work like that:

  1. Support admin scam: this requires that you're in a support chat from an exchange, a project or anything people could use some sort of help with. Try it: go to the Bitfinex Telegram room and ask for help because a deposit of yours is stuck. Just give it a try, it's fun. After some time, you'll get pm'ed by someone with an identical name to an actual support person from that service (in this case, Bitfinex). He will tell you that he can solve your problem and guide you through a series of bullshit instructions you'll have to follow closely. They'll create pressure ("do it fast, my time is limited" and the likes) and eventually lead you to make a deposit to a Bitcoin address they control.
  2. Security deposit scam: Someone who has no common Telegram rooms with you (strong indication that they have your Telegram handle from a former scam ICO you took part in... shame on you!) will contact you out of nowhere, asking you for help. He will pretend to be from a country which has banned crypto, and now his coins are stuck. You will receive a link to a more or less genuinely looking crypto exchange website they control, and he will offer you to help him doing an internal transfer of funds from his account to an account you newly created for that you can keep a portion of his BTC as a thank you. You, greedy as you are, will think that's easy money, agree and sign up. You will give him your account ID and he will initiate an internal "transfer" (actually, he just enters numbers into a database, so a random balance shows up in your account).
    Now, it's your job to initiate a withdrawal to a BTC address you control, keep ~20% of his funds and send the rest to a BTC address he controls. But it won't even get that far, because as soon as you initiate a withdrawal, you will be notified that you will have to make a small security depost of 0.01 BTC (amount varies) to ensure "your account is legit". How that proves legitimacy is really beyond me, but that's how this scam works. Now you might think, considering you're going to get 0.2 BTC soon anyway, 0.01 isn't that much and you send the BTC. Okay, you think, now let's withdraw. But as soon as you try again, the fake exchange website will tell you that this is too large of a withdrawal, and they need another "security deposit" of 0.05 BTC to prove even moar legitimacy. What a bullshit, right? But I know people who have fallen for that. Once you deposit the second time, you'll never hear from them again. Or who knows, if you appear dumb enough, they might try to milk you even more.
  3. Casino ripoff scam: Scammer pretends to be an admin at an online casino, and that he can manipulate rolls. He will offer you to make you winner and you share profits with him in return. He will then manipulate a few rolls for you so you see "it really works", and when you try to cash out, the rest works like the "Security deposit scam": you'll have to deposit a comparatively small amount of Bitcoin to be able to withdraw funds. But of course, you will never be able to withdraw anything from that website; once you've sent that "security deposit", the scammer's mission is completed.

Solution: learn to do proper research!

It's hard to stay alive in Cryptoland, I think nobody who has been around here long enough denies that. But there are a few ways to prevent getting scammed and… well, survive.

1. Get your greed under control

Don't be a greedy fucko. While there's probably little you can do against the feelings of greed to come up, you can very well notice when those feelings arise and act accordingly. This is of great help and you can litterally counter trade yourself: when greed reaches its climax and you desperately want to increase your position size, even if that means to max out the leverage: reduce your position size some. Just try it. You will notice that you start making more profits.
If you're a psycho-/sociopath and don't experience such feelings, just get an idea when others' greed / FOMO reaches its top. ;)

2. Don't be lazy, do your own research

If someone on Twitter (be it shills, "OGs", influencers, whatever) tells you what to buy, ignore it. They don't do research because they hope you'll make a quick buck. Most likely scenario is that they own a shitbag themselves which they don't get rid of and that they need someone to dump on. If you follow their recommendations and buy, chances are good you just bought something you never should have bought, and if you're bad enough of a person, you'll turn into a shill yourself because you're desperate about your shitty investment and now search for a greater fool to dump on.

Instead, research stuff on your own: go through the ANN section of bitcointalk.org, filter out the crap (also regularly check bitcointalk's Scam Accusations section for that purpose!) and find good, promising projects. Here's how I do it:

Conclusion

It's pretty simple if you're willing to follow those few rules. Don't mindlessly jump into things you get recommended by people you don't know, don't blindly trust developers and their promises (especially if they want your money before they have anything to show), don't buy things based on hype and stay away from things you know little about / haven't researched properly.

Keep in mind that while "playing crypto" might feel like you're playing with gambling tokens, but it's still your money you're giving away blindlessly. Imagine a stranger approaches you on the streets, asking you to give you a big chunk of your net worth, because he has a great idea (they all have "great" ideas!) and he promises he will deliver. Would you do it?

If you know the answer, think about it the next time you're thinking about buying into a project you know nothing about!