SafeMoon’s founders are based in various cities across the US, but as things stand, very little is known about the new cryptocurrency. Buying cryptocurrencies and decentralised finance tokens, as well as stocks and shares, is a risky business. Investing is never a guaranteed way to make money and you need to make sure you’ve got enough cash to keep you afloat if something were to go wrong. Cryptocurrencies and decentralised finance tokens are also highly volatile, so your money can go sky high or rock bottom in the blink of an eye. Here are six things you should know about SafeMoon before becoming an investor.
SafeMoon is a decentralised finance token
SafeMoon technically isn’t cryptocurrency but a DeFi token, according to its website.
They are very complex in nature, but essentially, a DeFi’s aim is to bring about disruption to the financial world and enable people to lend in peer-to-peer networks without needing a physical bank.
Just like Bitcoin, SafeMoon uses blockchain technology.
SafeMoon is very similar to a pyramid scheme
SafeMoon claims to reward people who buy and hold on to the stock, while those who sell the currency will be slapped with a penalty fine.
The coin’s Facebook page states: “Remember, getting to the moon takes time and the longer you hold on the more tokens you pick up.”
But this is often known as a multi-level marketing or a pyramid selling scheme.
Laith Khalaf, financial analyst at investment platform AJ Bell said SafeMoon “doesn’t sound too different from a pyramid selling scheme”.
He added: “You’re simply reliant on someone further down the line being willing to pay more than you did to turn a profit, which is a risky bet indeed.
“I would suggest investors steer clear, at least until a bit more is known about SafeMoon.”
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The name is a play on ‘Safely to the Moon’
Susannah Streeter, senior investment and markets analyst at Heargreaves Lansdown said the name alone “should ring alarm bells”.
Ms Streeter said: “Its name appears to be a play on the words ‘Safely to the Moon’, which has been one of the calls to action employed by Reddit traders in an attempt to push up the price of rival Dogecoin.”
The SafeMoon website also promises a growth trajectory for investors buying the DeFi tokens, but according to Ms Streeter, this is far from guaranteed.
Investors are making a big gamble and could lose it all
Investing is essentially the same as gambling, meaning there’s no guarantees you’ll come out with a win, or see what you pay in increase in value.
Cryptocurrencies are extremely high risk and are a speculative investment with limited track records and no underlying value.
Another issue is that there’s no guarantee you can convert crypto money back into cash, because it may depend on the demand existing market supply.
You should never put your money into anything you don’t fully understand.
SafeMoon’s legitimacy in question
SafeMoon is very new, so it’s not exactly clear whether or not its legitimacy, which inevitably means that if you invest, your money is at a much higher risk.
SafeMoon’s US founders have been holding ‘Ask me anything‘ sessions in an effort to reassure investors, but cryptocurrency companies aren’t regulated in the same way normal financial institutions are, which means there’s zero protection if things take a down turn.
UK crypto asset businesses must register with the Financial Conduct Authority (FCA).
Essentially, it is very hard to tell which crypto companies are real and which are trying to make a quick buck out of scamming investors.