How to Spot an Overhyped Crypto
Before we analyze an example, it’s crucial to understand the warning signs that there is a problem.
- Projects with no real-world use will likely die when the market turns.
- Tokens that are over-promoted by marketing are fancy but do not last long enough.
- Due to weak fundamentals such as low developer activity and questionable team credentials, structural issues arise.
- When a project legally operates in a grey zone, it can get looked at for a crackdown since regulators are looking harder in certain areas.
- The sudden rise and fall of certain cryptocurrency prices appear to be a scam, experts say.
Let’s look at five cryptos which are going to face a hard Q4 in 2023.
Crypto #1: Shiba Inu ($SHIB)
Why It’s Overhyped
The Shiba Inu coin is losing its relevance due to its inability of a specific utility. This coin shot up in 2021 due to its meme status.
Red Flags
- SHIB or Shiba Inu is called the Dogecoin killer. Other than this speculative appeal is in little else.
- Users may be losing interest owing to projects like Shibarium (the Layer 2) not gaining traction.
- So many dog tokens have diluted the effectiveness of SHIB.
Q4 Outlook
Retail interest for SHIB has begun to fade, thus it is expected to go in a steady downtrend as no developments are on the horizon.
Crypto #2: SafeMoon ($SAFEMOON)
Why It’s Overhyped
SafeMoon rapidly gained a community due to its unique tokenomics which redistributes fees to holders automatically. People claim these fixing mechanisms are mere band-aids for real issues.
Red Flags
- Even if there will be temporary demand because of the redistribution function, it ultimately creates a model that cannot be sustained.
- Investor confidence has been affected by past leadership controversies involving the founding team.
- Low Liquidity: A lack of trading activity could trigger sudden price changes in these tokens and increase the risk of price manipulation.
Q4 Outlook
With investors losing patience and viable competitors emerging, SafeMoon could see a significant drop in both price and users.
Crypto #3: Celsius Network Token ($CEL)
Why It’s Overhyped
In 2022, Celsius, a popular name in the DeFi space, declared bankruptcy due to mismanagement and liquidity issues. Despite attempts at revival, CEL remains a risky bet.
Red Flags
- The project may not have a future, due to the bankruptcy lawsuit and the frozen assets.
- With their misleading practices, the Celsius trust is gone; don’t expect new users or partnerships anytime soon.
- Plans for recovery post bankruptcy are unclear; investors are sceptical of the recovery.
Q4 Outlook
If CEL is unable to demonstrate it can recover, then it is unlikely to return to those levels. It can also drop further.
Crypto #4: Floki Inu ($FLOKI)
Why It’s Overhyped
Floki Inu rode the wave of tweets from Elon Musk featuring his adorable dog. Besides, this aggressive marketing trend appears to lack a utility.
Red Flags
- Promotional partnerships haven’t resulted in meaningful adoption.
- Using Meme Culture: FLOKI is not solid enough to distinguish itself from the countless other meme coins.
- Serious investors skip out on long-term investing due to a lot of volatility in profit and loss.
Q4 Outlook
As the novelty wears off and others enter the space, FLOKI may begin its decline and be sold in droves.
Crypto #5: XRP ($XRP)
Why It’s Overhyped
Ripple’s XRP coin is facing growing speculation the coin can survive in today’s regulatory environment for almost a decade.
Red Flags
- A lawsuit by the SEC which is uncertain may affect the U.S. Securities and Exchange Commission clouds XRP’s future.
- RippleNet allows for cross-border payments with and without XRP, making the currency quite irrelevant.
- Stagnant Development: The lack of updates in relation to Solana / Avalanche indicates outdated use.
Q4 Outlook
Lawsuit drags on or has bad ending could result in XRP price decline as per analyst predictions.
What Should Investors Do?
These cryptocurrencies are just overrated, under-performing, being attacked and likely to crash ‘sooner or later’. Here’s what investors can do:
- Look at your holdings. Do they fit your risk tolerance and investment objectives?
- Move away from projects with mediocre fundamentals and towards those with strong fundamentals, utility, and real-world history.
- Regularly check the news and anything that arises that could be useful to the public. Partnership or regulation can accelerate the drops.
- To limit a downtrend loss, set stop-loss orders. A stop-loss order is a selling mechanism to protect your capital.
Conclusion
The crypto market prizes daringness but penalizes laziness. The excitement over the tokens SHIB, SAFEMOON, CEL, FLOKI, XRP, etc., is likely to cool off in Q4. In fact, the hype could end up becoming a rude awakening. When investors see the signs, they can act in time to avoid getting caught in the fallout.
