What Is Shitcoin? How Does It Work?

The term shitcoin refers to tokens that have no intrinsic value, discernible purposes, credibility, or potential utility. These coins were not designed to provide any real-world value but as a joke, like the altcoins.

What are they?

Shitcoins are created with the intention of profiting from positive investor sentiment during bull markets. They are founded on price speculation, have limited liquidity, and are highly volatile which puts the investors at increased risk.

Shitcoins can be created with little to no effort, copying an existing blockchain and changing a few parameters to create a new token similar to that of the original network’s native token, or by creating a new network from scratch that lacks originality.

Shitcoin is an umbrella term comprised of several different tokens like joke coins, pump-and-dump coins, abandoned projects, dead coins, and so on.

Joke coins, also known as meme coins are created as a joke on established currencies like Bitcoin, but offer no utility. Although they are vulnerable to massive price fluctuations, they might gain a cult following with the humor and intrigue they create.

Pum-and-dump coins trick investors with inflated value and aggressive marketing, only to dump their holdings once the price reaches a certain level.

Unlike the rest, abandoned projects are not meant to scam anyone, but are projects discarded halfway through, and become obsolete without support or maintenance. Although fully developed, it is almost the same with dead coins, encountering a similar fate, rendered inactive after losing their market interest.

Dogecoin, Shiba Inu, 1inch Network, and ApeCoin are some of the examples for shitcoins. Among these, Dogecoin and Shiba Inu have gained massive popularity and are doing well owing to their online presence and their improved investment potential.

There is also a token literally named Shitcoin, which obviously belongs to the same category, and was developed as a joke coin. It follows the whole theme and the white paper is called toilet paper. Its version of NFTs is known as Non-Fungible Turds and the platform includes another native token, called Baby Shitcoin.

The platform is primarily designed to mint and sell NFTs while providing a space for the exchange of fungible assets.

How do they work?

Once created, shitcoins follow a laid-out plan through which they can gain popularity so that they end up profiting their owners in millions of dollars.

  • Creating Hype

This stage involves the promotion of the currency through various platforms, mainly social media. The creators present the tokens with claims such as high returns, revolutionary technology, and features that set them apart from the competition and could be beneficial to the investors.

They also create an illusion of scarcity, which in turn will increase demand and lead to a sudden popularity of the token.

  • Price Speculation

Since cryptocurrencies work on speculation, creators of shitcoin attract investors with promises of increased future value.

They manipulate the users with the idea of taking advantage of price volatility, buying low and selling high in the future.

  • Exponential Growth

Shitcoins are featured with exponential growth in value out of nowhere, created through artificial means of coordinated buying that inflates the price and create more demand, along with limited supply.

Once it reaches a predetermined level, they pump and dump the coin, resulting in a crash in price.

  • Loss of Value

After the crash, the hype around the token begins to fade and the investors lose faith as the lack of purpose and utility becomes more evident. This causes a complete loss of value leading to abandonment of the coin.

The creators who made a profit leave the token without support, only to lead to more losses on the investors’ part.

The Bottom Line

The majority do not consider shitcoins as a worthwhile investment. They demand extreme caution with their highly volatile prices, security risks, lack of transparency, and low liquidity. However, some users take advantage of these features and make more profit than they do with original tokens.

Compared to them Shitcoins have a low entry cost and add to the diversity of your portfolio, especially if you have a limited budget. Whether you decide to invest in shitcoins or not, creating a basic understanding of the system and how it operates will help in making an informed decision and avoiding potential risks.

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