This week, a digital token inspired by the popular South Korean Netflix series Squid Game lost almost all of its value when it was revealed to be a scam. Launched in late October, the cryptocurrency Squid marketed itself as a play-to-earn type of digital asset. The token was promoted for use in a new online game that was due to go live this month, and which would be inspired by the show.
Early investors were told the token could be used within the game to earn additional tokens, which could then be exchanged for other cryptocurrencies or even fiat currencies in the real world. The price of Squid soared from 1 cent up to $2,856 in a single week’s time, before abruptly losing all its value. This was due to a type of scam described as a “rug pull” by crypto investors, wherein the promoter of a digital token draws in buyers, stops trading activity, and makes off with the money from the sales — in this case, an estimated $3.38 million.
Many cryptocurrency experts had already warned buyers of tell-tale signs that Squid was likely to be a scam. People who bought tokens were unable to resell them; the website and white paper, which outlined the project for potential investors, contained numerous spelling mistakes and grammatical errors; there were even unfounded claims relating to partnerships with Netflix and Microsoft. In short, a close look at Squid gave rise to clear questions of legitimacy.
Today, the associated website SquidGame.cash is no longer online, and social media accounts promoting the tokens have likewise vanished. Following the crash, more than 40,000 people still held Squid tokens, which were available for sale on decentralized crypto exchanges (meaning without any regulation or due diligence).
Overall, the situation paints a picture of the negative side of cryptocurrency, which was initially conceptualized as a digital payment system that wouldn’t (and in fact doesn’t) rely on banks to verify transactions. When utilized properly, cryptocurrency promotes faster, efficient exchanges of wealth and data in a massive variety of sectors. Individuals use crypto for peer-to-peer transfers; various retail providers now accept high-profile cryptos in transactions; recently, the peer-to-peer food ecosystem Bistroo even got on board, announcing that merchants can now accept a variety of crypto payments. And even these examples barely scratch the surface of the useful applications of crypto. However, the Squid scam shows that risks are still prevalent, and the crypto ecosystem remains a sort of Wild West of modern finance.
Avoiding crypto scams
Investing in various commodities is a good way to build wealth and secure your financial future –– but it definitely requires a thorough and well-researched approach. First and foremost, as the financial advice platform AskMoney discussed in a recent article on the subject, you’ll need to determine which types of assets best suit your “timeline” and goals. Next, you’ll have to ensure that you’re signing up with legitimate, reputable trading services that will allow you to keep comprehensive tabs on the assets you choose to buy into. And whatever approach you take, you’d do all to keep meticulous records of all transactions.
Taking those early steps will set you up on stable ground for any financial investment you might be considering. From there, you’ll want to further protect yourself by diversifying your portfolio. Cryptocurrency should only be one part of your broader investment strategy; stocks, bonds, other commodities, and any alternative ventures that may appeal to you can make up the rest of it. The benefit of this is that it keeps any on bad investment –– such as a purchase of illegitimate crypto –– from tanking your whole portfolio. It’s an important strategy to keep in mind given that according to CNBC, 50% of Americans struggle with the concept of diversification (specifically not recognizing the benefit of investing in a diversified mutual fund as opposed to a single asset). Really, this is an important protect strategy for any investor. But given some of the risks inherent to an emerging and unregulated market like crypto, diversification is particularly significant in this space.
Lastly, with respect to crypto specifically, it is vital to choose an exchange (and wallet) with a sound reputation. We alluded to this above, but to expand on the idea, we’ll note that there are hundreds of platforms on which you can buy, sell, and store digital currencies. Many are vetted, secure, and at this point reasonably trustworthy –– but some others are not. Read reviews, talk to experienced investors, and keep abreast of any news regarding exchanges you may be considering, or already using. This will keep you informed as to which exchanges, wallets, and currencies you can trust, and will also ensure that you learn quickly of any questionable activity that may be occurring.
The hope is that events like the Squid scam will shed light on the potential risks of crypto trading, and that more traders will take precautions like the ones we’ve outlined here. With a careful approach, you should be able to avoid scams and add crypto to your portfolio.
For more crypto news and updates, please feel free to explore some of our other articles here at Block Telegraph today.