Cryptocurrency has been having quite the year. While the biggest names in crypto -- Bitcoin, Ethereum, and Dogecoin -- have been gaining most of the attention, there have been countless new cryptocurrencies popping up lately.
One of the newest digital currencies is SafeMoon, which launched in March of this year and has already gained more than 2 million buyers.
Its also the fifth-most-visited page on CoinMarketCap, a price-tracking cryptocurrency website. Based on CoinMarketCaps rankings, SafeMoon is searched for more often than Ethereum, one of the hottest cryptocurrencies available.
Although SafeMoon has been making waves in the crypto world, that alone doesnt necessarily make it a good investment. Heres what you need to know about the trendiest new cryptocurrency.
Image source: Getty Images.
What is SafeMoon?
With so many different cryptocurrencies available, it can be tough to tell them apart. There are a couple of things that differentiate SafeMoon from other digital currencies, however.
For one, investors are charged a 10% fee if they choose to sell their tokens. The purpose of this fee is to encourage investors to hold their tokens for the long term. In theory, that should reduce SafeMoons price volatility, because there wont be as many day traders and short-term investors buying and selling throughout the day.
Every time an investor sells a SafeMoon token and pays the 10% fee, a portion of that money is distributed to other SafeMoon investors, and some of it is destroyed permanently. So as more investors sell SafeMoon, there are fewer tokens available overall. SafeMoons creators believe that scarcity could increase the cryptos value, similar to the way that Bitcoins limited availability is said to make it more valuable over time.
Is SafeMoon actually safe?
All cryptocurrencies carry a certain amount of risk, but SafeMoon is one of the riskiest. In order for any cryptocurrency to survive over the long run, it needs to have some sort of intrinsic value.
Right now, SafeMoon doesnt serve any real purpose. The vast majority of businesses dont accept cryptocurrency at all, and SafeMoon is so new that its unlikely to gain traction anytime soon. Without any real-world utility, it will be tough for SafeMoon to succeed over time.
SafeMoon also uses the Binance Smart Chain, which is a key difference from decentralized ecosystems used by Bitcoin and Ethereum. With decentralized crypto, there is no central authority. In other words, its not controlled by any one company, government, or country. Binance is a centralized ecosystem, and it has full control over its blockchain technology. That means that it has the power to change anything about its system at any time.
Thats not necessarily a bad thing, but it does require SafeMoon investors to trust that Binance will do whats in the cryptocurrencys best interest. Considering the fact that decentralization is one of the key advantages of crypto, SafeMoons centralized system could be a disadvantage.
In addition, security company CertiK performed an audit on SafeMoon and found a major vulnerability. CertiK found that a significant portion of the seller fees go to a single account controlled by one of SafeMoons owners. If that account is compromised in some way, it could put SafeMoon investors at risk.
Should you invest right now?
Whether you choose to invest in SafeMoon depends on your personal preferences and tolerance for risk. If you have cash to spare and are willing to take a gamble, you may be able to make a bit of money with this investment if youre lucky. But SafeMoon is a very risky type of cryptocurrency, and considering its lack of utility and its security issues, there are plenty of better investments out there.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.Katie Brockman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Bitcoin. The Motley Fool has a disclosure policy.>
Motley Fool Returns
Stock Advisor S&P 500
Discounted offers are only available to new members. Stock Advisor will renew at the then current list price. Stock Advisor list price is $199 per year.
Stock Advisor launched in February of 2002. Returns as of 09/01/2021.
Cumulative Growth of a $10,000 Investment in Stock Advisor Calculated by Time-Weighted Return
Find us at the office
Blotner- Kwas street no. 55, 39246 Canberra, Australia
Give us a ring
+78 715 483 676
Mon - Fri, 10:00-22:00