In a nutshell, although there is a lot of potential for growth in very minute sized coins, there are greater risks involved.
And often times, if you are not well familiar with the business background as well as with the necessary information on how your investment is doing, there is a massive chance for you to get scammed.
Most investors nowadays want to make money fast in revolutionary crypto space. This is possibly one of the main reasons that so many newbies in crypto world are also getting scammed and often lose a lot of money.
Sad to claim, that the “stress-free money” attitude has reached the crypto market and has left a lot of people new comers unwisely on penny coins that may every so often be excessively risky to begin with.
Let us understand how this variety of coins can actually be challenging to investors.
What Are Penny Cryto coins?
Penny coins are cryptocurrencies that are traded for less than a dollar or, in some cases, less than five dollars for each coin or token. Most of these coins only have a short operating history and only have a few million dollars in net real assets. Typically, these have low market caps, minimal liquidity and are often traded on over-the-counter exchanges.
Why Are Penny Cryptocurrencies Unsafe?
What you should know about these currencies is that trading them may be much riskier as compared to regular coins. In spite of everything, with such issues as these coins having no satisfactory credentials, provide very limited information about the businesses, and may often pose vast threats for scams.
1. Absence of Experience and Background
The chances are, if businesses are willing to trade coins in such small amounts, they most probably have very little business history or may have a very negative one. These businesses are either just starting out in the business or they may have experienced bankruptcy, thus they resort to selling their coins at such low prices.
As there isn’t a good deal of information available on penny coin companies, there is a massive probability that you might be making a bad investment. Then of course, you may end up losing more money than you plan on gaining.
2. Incomplete or Limited Information
For most firms that offer penny coins, not a lot of data is really available for investors to view on their websites or elsewhere. In the end, most exchanges in this market operate on the Over The Counter Bulletin Board (OTCBB), which do not really require thorough reports for public posting.
Without such valuable information, it would be very problematic on the investor’s side to make the accurate and objective trade decisions, and this could often lead to risky guessing.
A Methodical and Structured Approach to Trading in the Crypto Market
3 Important Steps To Profitable Crypto Picking |Don’t Ignore
3. Bribes And Scams
It isn’t common for such coins to be promoted by people who have been paid to do just that. Perhaps, you have received spam emails that may sound too good to be true, which may encourage you to invest in a specific penny coins.
The normal development happening that enables bribes and scams is that a company may buy some coins and then spread emails to tell people that a certain cryptocurrency is doing well in the market.
A lot of readers would then respond to this by investing in project, causing the price to dramatically shoot up due to supply and demand. From this time, the scammer may sell his or her share for a huge amount before the price dramatically goes down again leaving many investors to lose a lot of money.
5 Stages To Researching a Crypto Trade Before Investing
How And Why Are Futures Traded? | A Simple Guide To Futures Trading
In a nutshell, although there is a lot of potential for growth in very minute sized coins, there are greater risks involved. And often times, if you are not well familiar with the business background as well as with the necessary information on how your investment is doing, there is a massive chance for you to get scammed.
For this reason, if you are new to the whole crypto market, make sure that you decide cleverly on which type of coins to invest and do not go after what may seem easy to get you rich.
This information is for Learning purposes only. We are indeed not financial mentors. It should not be considered legal or financial advice. You should consult with a financial advisor or other professional to find out what may be the finest for your individual needs and risk tolerance.
Please do your own research.