A new cryptocurrency called Safemoon has been dubbed as the successor of Dogecoin, and with the hype surrounding the industry, it is currently attracting investors and has been trending as of late.
Why has it been called a Dogecoin copycat, though? Well, it seems Safemoon is akin to everything that has made Dogecoin a hit.
Dogecoin Value Drops After Musk's "Hustle" Remark
The Dogecoin price value dropped significantly recently, falling 28 percent as per PYMTS.com reported. The meme coin settled at 55 cents from 70 cents after Tesla and SpaceX CEO Elon Musk appeared on "Saturday Night Live" the past weekend and said that the cryptocurrency was a "hustle."
Investors has since moved in droves to place their stake on Safemoon, a decentralized finance (DeFi) product in their attempt to seek higher returns. Deseret News noted that Safemoon is currently priced at $0.000007, leaving much space to grow in value as investments pour in.
But just how safe is Safemoon? Many investors are wary if it will even take off.
Safemoon Emerges as Popular Investor Choice
Benzinga reported that after its launch last March at $0.000000001 per coin, it reached a high of $0.000012 before falling back to around $0.000004, offering a 1.000 percent gain. It has been a popular choice since then, with now over a million holders on its platform.
But with such huge opportunities come immense risks.
Risks in Investing in Safemoon
As buying such cryptocurrencies and DeFi tokens are generally risky, higher returns is never guaranteed. Investors would need an enormous amount of cash to pour in just to stave off major losses. Such tokens are extremely volatile and while it can indeed skyrocket to the moon with immense earnings, it can also plunge back to Earth in no time with emptied pockets.
Read also: Dogecoin Price Prediction: Joke Crypto Nearing 50-Cent Mark Ahead of Elon Musk's SNL Show
Yet the most alarming warning sign of them all is that it seemed Safemoon is akin to a pyramid scheme, as MSN noted. Safemoon seems to be taking a tight grip on its investors by rewarding those who purchase or hold on to their stock, but penalize those who sell with a hefty fine.
Benzinga noted the charge is a 10 percent fee, with half of the penalty going back to other Safemoon investors. It notes that Safemoon investors would depend on other individuals investing into the cryptocurrency to boost their investment.
Safemoon, a Pyramid Scheme?
Other investors view this as a simple multi-level marketing or pyramid selling scheme. AJ Bell financial analyst Laith Khalaf was brutally straightforward in his remark on MSN, saying Safemoon is not any different from a pyramid scheme. He said investors were "reliant on someone further down the line" who would invest more than what they initially did to reach a profit. He advised investors to "steer clear" from Safemoon until more is established about the cryptocurrency.
Another warning sign, as the publicationn noted, is actually the name of the cryptocurrency itself which was coined from a play of words from Reddit users, "Safely to the Moon," to shore up Dogecoin prices.
The cryptocurrenciy remains a speculative investment since it has little to offer in terms of value and track record.
To top it all off, its legitimacy being a new offering can also be held in question. Even with Safemoon founders reassuring the public, such cryptocurrencies are not regulated the same manner as traditional financial products. As such, investors won't have any protection if things turned for the worse.
