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Gate.io Blog How to Identify Suspicious Crypto Projects?

How to Identify Suspicious Crypto Projects?

20 April 17:58

Tokenomics: How are the tokens distributed, and are the top wallets holding too much crypto compared to the regular users? Also, look into how often transactions occur.

Inactive community or social media bots: Both an absent community and an active one filled with “hype” bots are tell-tale signs that the project is trying to artificially boost itself into popularity.

Admins/devs rarely interact with investors: If the community needs to be present, that counts double for the actual people behind the projects. They should be consistently updating their communities with development updates and looking for direct feedback whenever possible.

Way too many people are calling it a scam: Where there’s smoke, there’s probably a fire. If crypto investors outside a project’s “hype bubble” are constantly calling it a scam or giving other frequent negative feedback, try to discover the reason why and if there’s an actual argument to sustain it.

In crypto media, communities, influencers and news, there is always a strong focus on identifying what the next gem is; the crypto project that is going “to the moon” and taking all the investors with it. But most often than not, the reality is that investing is not that simple - it takes time, effort, and most importantly, it takes a whole lot of research and attention. It also takes balance; the same effort that investors put into identifying the next big crypto project, should also be put into identifying suspicious ones that are not worth their trouble.

With that in mind, this article covers the top factors investors should be on the lookout for to help identify suspicious crypto projects that you can check and research all by yourself. Keep in mind that it doesn’t mean projects with these characteristics are definitely suspicious and should be avoided - they are all strong indicators, though, especially combined.

Market cap and how old a project is are factors that won’t be taken into account. After all, every great crypto project has to start somewhere. And scams can also be surprisingly huge. Remember Bitconnect? Maybe it’s best if we forget.


Tokenomics are the structural economics surrounding a project, such as its token distribution and mining features, that make it attractive to investors in the long run.

When it comes to distribution, how much of the assets are in the control of founders and developers, and how much is in the hands of the users and investors? Depending on the crypto’s network, check ETH Scan, BSC Scan or others by adding your token to the search bar and clicking on “Holders.” If a too-large percentage of the tokens are under the control of just a few wallets without any explanation, such as staking contracts or token-burn wallets, then it can be a red flag.

Also, make sure to read through the project’s whitepaper to see if the asset distribution makes sense, whether it may inflate or deflate the price in the long run, and if the developing team’s set structures match what’s actually happening behind the scenes.

And of course, don’t forget the transactional flow. A real project is being used by real investors and real users frequently, regardless of how big or small its market cap is. Through the Scan websites, the “Transfers” section shows all the crypto transactions going through that particular project. If transfers don’t happen often and, when they do, only through the same few wallets who seem to hold a lot of tokens, then something is likely off about their intentions.

Inactive community, or social media filled with bots

As mentioned previously, real projects have real investors and real users interacting with them. In the digital age, it is virtually impossible for new businesses to survive without any online presence, and that includes cryptos.

Go through their social media and communities, especially Discord, Telegram and Twitter which are the most used in crypto. Are people truly engaging with them, besides looking for some fast profits? Are they showing concerns and offering constructive feedback on the development (which is a great thing)? There is no real investment opportunity that presents a useful resource without people excited about it, plain and simple. If the communities are not lively, the project likely isn’t either.

This brings us to bots, a problem on the opposite end of the spectrum. Maybe you’ve checked all their social media and they are full of followers, likes and comments. Seems to check out, but look deeper into it; do all followers and their likes look the same? Are they usually posting the exact same message, with the intent to generate hype around the token’s price going up? If so, you might’ve stumbled upon bots; algorithmic accounts used by the developers attempting to legitimize the project.

Luckily, they are easily identifiable and it doesn’t take much effort to do so. If the communities don’t seem real, chances are the crypto itself isn’t either.

Admins/devs rarely interact with investors

If investors and users must be real, then the actual admins and developers most definitely need to be as well. A good project always has admins, modders and developers interacting directly with the community about what is being worked on backstage, their current goals and what the investors can expect for upcoming releases.

One factor that has looked common in most suspicious crypto projects is the lack of interaction between the actual organization and its users. In these initiatives, developers are mostly absent and barely feel the need to communicate with their core audience in any way. For that reason, they also don’t believe in the crypto standard of running AMAs (Ask Me Anything) sections where they answer questions from the community.

Just take a look at the social media communities of the crypto investments that you’re researching and dig deep into how the administrative members interact. If they are barely present, and especially if investors complain too often about this factor, then they might not be looking to build a fruitful community for a long-term cryptocurrency.
Way too many people are calling it a scam

Although taking rumors and popular opinions into account is extremely subjective and rudimentary, general retail investors who are in touch with their markets are often more right about this than not. When a crypto’s community you’re researching is filled with bots, or even if it isn’t, try to find comments from active crypto social media users or even news articles related to the crypto - which are usually more reliable - for some insight on how investors outside of the “hype bubble” are actually feeling about the project. If the word “scam” is floating around way too often, that’s definitely something to consider.

But don’t stop there; find out why the project has been getting so much negative feedback - is there reasoning behind it or are these investors lashing out because the price suddenly dropped recently? If it did drop, was it because of a strange decision from the developers that cause people to bail? There are many factors to consider when taking the general crypto public seriously, but remember this old saying; where there’s smoke, there’s probably a fire.

Author: Gate.io Researcher: Victor Bastos
* This article represents only the views of the researcher and does not constitute any investment suggestions.
*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all other cases, legal action will be taken due to copyright infringement.
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