The top 10 red flags you MUST watch out before investing in a crypto project

Merunas Grincalaitis
4 min readDec 12, 2022

You want to invest your money into crypto? Good, you should know you’re at the mercy of whales and sharks. That’s why you gotta be smart. Look out for these red flags before putting your money to work:

1.- Lack of transparency or clear information about the team behind the project, their backgrounds, and their experience in the cryptocurrency industry.

To be honest, most projects should be anonymous by the nature of cryptocurrency. In fact bitcoin is anonymous in itself. However that must be justified with some kind of proof and system to verify the legitimacy of the people behind the project.

2.- Unclear or unrealistic goals or roadmap for the project.

Unclear or unrealistic goals or roadmap for a cryptocurrency project can be a red flag for several reasons. Firstly, it can indicate that the team behind the project may not have a solid understanding of the technology or the market, and may be unable to deliver on their promises.

This can make the project less attractive to potential investors, as they may be unsure of what to expect from the project and whether it is a good investment.

Additionally, unclear or unrealistic goals can also indicate that the team may not be committed to the long-term success of the project, and may be more interested in making a quick profit. This can create uncertainty and doubt among investors, and can lead to a lack of confidence in the project.

Furthermore, a lack of a clear roadmap can make it difficult for investors to track the progress of the project, and can make it harder for the team to hold themselves accountable for meeting their goals. This can lead to a lack of trust between the team and the investors, and can ultimately damage the reputation and success of the project.

3.- Lack of a solid use case or real-world application for the cryptocurrency.

Think about it. If a project can’t be used in the real world what’s the point of it? It’s like building a spoon to eat meat. Useless.

Therefore you gotta pay attention to what projects are building. See if they know their target. Their needs. Their wants. If they are solving a burning problem for some people, then they are building a great project.

4.- Overly positive or unrealistic claims about the potential returns or benefits of investing in the project.

Some projects are filled with shillers that want to keep up the positivity and feel-good momentum. That’s not bad in itself. However it turns into a problem when those people ignore the problems naturally occurring within a project.

Eventually those people lose their enthusiasm. Which causes them to turn against the project and lose all the good morale.

5.- Lack of a viable business model or source of revenue to support the project.

Every single crypto project is a business. That’s right. It may not look like it but their goal is to make money in a recurring manner.

When a project makes a lot of money every month, all the token holders and participants they benefit. When that doesn’t happen, problems arise.

6.- Large amounts of pre-mining or pre-allocation of the cryptocurrency to the development team or early investors.

Oh boy this one is big. Some projects reserve huge amounts of the total supply to the team. They end up having too much control and end up ruling over all the investors.

That’s never a good sign because they can shut down the project anytime and cause issues whenever they do it.

7.- A high number of complaints or negative reviews from other users or investors.

Now this one is tricky. Every project has haters and people trying to take it down. But when it’s in a consistent basis and you see nothing but negativity, it’s because there has been some major issues and the project has to urgently work towards fixing them.

8.- High levels of hype or buzz around the project, without any substantive evidence to back up the claims being made.

I’ve seen it a million times. Projects that are super exciting. Projects that have all the right numbers and make you feel like you’re missing out.

They have been heavily manipulated to make you feel that way and invest with them. Be careful.

9.- Requiring investors to keep their funds locked up for an extended period of time, or imposing other restrictions on their ability to withdraw or sell their investments.

This one is very uncommon because people hate having their funds locked. That’s why it shouldn’t be that much of a concern.

However some projects are notoriously problematic with it. I myself invested in one token that required you to wait 9 months (!) to unstake the tokens with the rewards.

All while the token price was dropping everyday because the founders were selling their share slowly. Extremely frustrating. And all that wasn’t mentioned when I got the tokens.

10.- Insufficient security measures, such as a lack of two-factor authentication or other basic protections for user accounts and funds or audits.

Audits are essential. You can have the best code in the world but if nobody has gone into it and tried to break it down, that code is a hazard.

You can only know how good a project is by how secure it is. That’s why those projects that invest in good audits are winning.

Anyway that’s been it when it comes to red flags. You must remember that every project has red flags but it’s all about how the team takes care of them and how they respond that make the difference. Have a blessed week.