Shilling in cryptocurrency: how to spot and avoid it
As long as people have been selling products and services, there have been ‘shills’ who are paid to pump up a said product or service to make it seem more appealing. Even before the proliferation of social media, it was hard to know the veracity of such claims.
Now that everyone is online, people turn to un-vetted opinions through online reviews, blogs, YouTube videos and social media posts. This is especially challenging with emerging technology like cryptocurrency. People may not fully understand what goes into a successful product, or even know what to look for.
They turn to ‘experts’ online and sift through lots of opinions. The problem is that with so much money to be made in ICOs, the lure of pumping out false praise is too strong for some less than scrupulous people. Social media personalities, bloggers and vloggers can be paid upwards of $50k to promote a coin that has no promise whatsoever.
The casual investor who’s trying to find out the next cryptocurrency worth investing can be easily swayed by this disingenuous content. We’ll help you learn how to spot such misinformation, and give some tips to avoid going down the wrong path.
Investment before advertising
When people make investments in the stock market, they try to do as much independent research as possible. Fund managers are poring over financial data and compulsory reporting to predict what companies are going to succeed.
Cryptocurrency lacks any formal investment structure or reporting, for now. Many organizations and consortia are working on these checks and balances, but in recent years it has been a bit of a free-for-all. That leaves the market susceptible to shilling.
There are a couple forms of shilling, not the least of which is pumping up the value by buying a bunch of a certain coin. The crypto market is bleeding-edge, and people are looking for the next bitcoin. So if a blogger or social media personality has skin in a certain company, it makes the project look more appealing to investors.
Also, buying the currency increases the value so that this rise can be used to spur further investment from others. Unfortunately, bad actors often do this with the intention of dumping their holding as soon as the value rises.
If you treat your crypto investment as an investment as opposed to looking for the right ‘advertising,’ you have a better chance of avoiding shills. Do your own research and find as much financial history as possible.
Once a shill
There’s an old saying ‘it’s hard for a leopard to change its spots,’ and the same goes for crypto shills. There’s a better than average chance they have done it before. Try to see if you can find out how many failed projects they were promoting. Researching the ‘experts’ is necessary in this age of self-publishing. Anyone can create a blog, build a social media following or publish a video.
Look for commentary from impartial third parties. There are industry watchdogs and cryptocurrency advisory companies forming. Find out who the project’s executive team is, and who is advising them. If there’s a high profile advisory firm, don’t hesitate to contact them. Stick with projects that have such a backbone.
Investing in a certain cryptocurrency because people on Twitter say it is going to be the next bitcoin is not a winning strategy. But somehow still people are swayed by such posts.
As marketing in the digital age evolves, paid content is becoming one of the most desirable ways to promote something. Unfortunately, it can be a bit insidious as it’s presented as impartial. A blogger might be getting paid to post a favorable review of an upcoming ICO.
One example is Bitpaction, a failed ICO from February 2018. While heavily hyped online by many bloggers and social media gurus, it turns out that there were only 11 account holders and 96.6% of BPS coins were held by one wallet.
The supposed revolutionary exchange went live and users transferred money into the online exchange. By June 2018, all the assets were drained and the founders disappeared.
By researching the executive team, you would have found that many of the members were not actual people. Checking out who currently held the BPS tokens, you would have recognized the imbalance in holdings. In this case, the shill was likely an anonymous person posing as one of the executive team.
Those of us who shop online are becoming more savvy at spotting fake reviews. These are the skills we can apply when it comes to cryptocurrency investments as well. You can tell when something is just off about the review, or if you don’t see a lot of corroborating reviews.
Researching the reviewer is also important. Do they have any other reviews for a product or token that you know about? Do they only review one product? These are all warning signs.
Don’t fall for it
By looking for corroborating opinions, independent voices, financial reporting and an executive team with a track record, you can help neutralize the effectiveness of shills in cryptocurrency. They wouldn’t exist if they weren’t successful, so the more we combat them the less effective they will be.
Instead of listening to a supposed expert, find out who the best experts are and follow them. They will usually be quick to point out a scam or a dubious product. And remember, if it sounds too good to be true, it probably is.