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There have been approx 23,000 cryptos created to date, but many of them are no longer active or hold any substantial value. If we remove these cryptos from the crypto space, there will be only less than 8,900 crypto coins in which you can invest or trade. More and more cryptos are launching now and then, while many are achieving the status of dead coins. If you are among the millions who invest or trade in cryptos or are new to the crypto space, you need to understand what dead coins are and how you can avoid them.
What are dead coins?
Dead coins are cryptos that are either worthless, inactive, or both. These coins are frequently dropped by their development teams, come across as scams or frauds, or haven’t really taken off. There are various characteristic features by which you can identify whether a coin is dead or not.
Identifying a dead coin
- The developers have abandoned the project or delisted it.
- Used as a scam.
- No official websites, or they are inactive.
- Issues with the wallet.
After having a fair idea of what dead coins are. Do you think there are types of dead coins present in the crypto space?
Well, the answer is – Yes. There are various types that you need to be aware of. Let’s have a look at them in the following section.
Types of dead coins
The most common types of dead coins are:
- Joke dead coins
Joke dead coins weren’t designed with a particular use case in mind. Usually, some enthusiasts make currency bets despite these coins being created solely for that purpose. Joke coins are fairly popular, and 2021 has been particularly successful for meme coins like Dogecoin. However, it is important to note that for every joke coin that is successful, nine others fail to yield that much. JesusCoin and CryptoMeth are examples of joke-dead coins.
- Abandoned dead coins
These are the dead coins that circulate most frequently and for a variety of reasons. A coin’s developers might give up on it if they have inadequate funds, lose traction around it, or get banned from exchanges. This type also includes coins with scant information regarding their causes of death. An outstanding example of an abandoned dead coin is Lucky7Coin.
- Scam dead coins
Many people use scam coins, especially since the first ICO launched in 2017. Pump-and-dump schemes and extensive pre-mining are two prime types of scams associated with these coins. To prevent falling victim to scam dead coins, it would be preferable to avoid projects where the development team retains most of the tokens. Bitconnect is an excellent example of a scam dead coin because it was the largest Ponzi scheme in the crypto sector.
Let’s now understand the possible reasons that cause a coin to convert into a dead coin.
4 Key reasons why a coin becomes dead
Understanding the reasons behind the fall of dead coins can offer valuable insights into the challenges faced by crypto projects. Here are the top four reasons contributing to the death of coins:
- Lack of Development:
One common cause of a coin’s demise is the absence of active development. Continuous improvements and updates are necessary for cryptos to remain pertinent. If a project lacks ongoing development, it can quickly lose momentum and disappear.
- Scams and Fraudulent Projects:
Regrettably, the crypto market has experienced numerous scams and fraudulent projects. Some coins are launched solely to defraud investors. These projects vanish once their objectives are fulfilled, leaving investors with worthless tokens.
- Insufficient Community Support:
A flourishing crypto often relies on an active and engaged community. If a project fails to cultivate a strong community around it, it may struggle to gain traction or attract attention. Without support and interest from users, the coin’s relevance may gradually diminish.
- Technological Obsolescence:
Technology advances swiftly, and cryptos must adapt to remain relevant. If a coin’s underlying technology becomes outdated and fails to keep up with advancements, it can lose its competitive edge and fade into obscurity.
How can you avoid dead coins?
Investors often encounter the risk of investing in dead coins, which are cryptos that no longer undergoing active development or maintenance, rendering them essentially worthless. To steer clear of such coins, it is crucial to engage in thorough research and exercise due diligence. Here are some recommendations for avoiding dead coins:
- Research the development team:
Before investing in crypto, it is vital to investigate the associated development team. Seek information regarding their expertise, qualifications, and previous projects. If team members remain anonymous or have a history of involvement in scams, it is advisable to avoid the coin altogether.
- Read the whitepaper carefully:
The whitepaper is a crucial document outlining the crypto’s technology, use case, and roadmap. It is essential to read it carefully and watch out for any potential warning signs, such as vague or unrealistic claims.
- Leverage the social media platforms:
Platforms like Twitter and Reddit can serve as valuable sources of information about cryptos. Look for communities that are active, have ongoing discussions, and have a generally positive sentiment surrounding the coin. A coin with a substantial following and an engaged community is more likely to be alive and active.
- Keep distance from Get-Rich-Quick schemes:
It is crucial to stay away from get-rich-quick schemes. It is probably a scam if a particular crypto guarantees unrealistically high returns or appears excessively advantageous. Sticking to well-established coins and reputable exchanges is advisable, and it is important never to invest more than one can afford to lose.
Investing in cryptos has the potential for both risks and rewards, much like stock investments. Over the years, many cryptos have become “dead coins,” but there are measures you can take to lower your risk of making bad choices and lock in profits from your crypto investments.Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.