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2 Reasons to Sell Floki Inu

By Will Ebiefung – Updated Nov 3, 2021 at 9:11PM

Key Points

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Floki Inu is soaring. But is this a pump-and-dump scam?

First came Dogecoin (DOGE -0.64%), then Shiba Inu (SHIB -2.89%), and now Floki Inu (FLOKI 2.49%). Dog-based cryptocurrencies are soaring -- making early speculators boatloads of money. But while it's tempting to hop on the bandwagon, Floki's rally is based on hype, not fundamentals, which means the bubble could soon pop.

Let's explore the reasons why it might be time for investors to jump ship on this dog of a cryptocurrency. 

Picture of a Shiba Inu breed of dog

Image source: Getty Images.

1. The rally is based on hype

Up by 5,912% since its June launch, Floki Inu now boasts a market cap of $2.3 billion, according to data from coinmarketcap.com. Like its rivals Dogecoin and Shiba Inu, Floki's developers have embraced the meme-hungry cryptocurrency community -- and its two unofficial mascots: the Shiba Inu dog breed and Tesla's CEO, Elon Musk. 

On June 25, Musk tweeted, "My Shiba Inu will be named Floki," spawning a slew of coins based on his new pet. 

Floki Inu was probably able to rise above the crowd because of its well-targeted name and rapid listing on Uniswap, which is the biggest Ethereum-based decentralized exchange. The public's fear of missing out, or FOMO, is another likely trigger for Floki's meteoric rise, as investors who missed out on similar tokens like Shiba Inu (up 60,000,000% since inception) looked to bet on the next bubble. 

2. Potentially manipulative promotion

According to Floki Inu's whitepaper, its developers aim to build complementary projects, including a gaming metaverse called Valhalla and an educational platform called Floki Inuversity. The token has also gained some real-world utility through a partnership with CryptoCart, which will allow holders to shop at over 1,700 stores with Floki Inu.

But these projects are probably not the real reason for Floki Inu's meteoric rise. Instead of letting the fundamentals speak for themselves, Floki Inu's developers have engaged in potentially abusive marketing strategies. 

According to the Financial Times, Floki Inu has launched a major advertising campaign on London's subway system. This "full out marketing assault" is funded by a 4% fee on purchases, and it includes slogans like "Missed Doge? Get Floki" designed to trigger FOMO in the public. 

These tactics are similar to those used by illegal pump-and-dump schemes which aim to rapidly boost the price of public stocks through aggressive promotion (pumping) before selling (dumping) and leaving unfortunate late investors holding the bag. 

Is Floki Inu a scam?

Cryptocurrencies are popular with scammers because they often fall outside of existing financial regulation, and their built-in anonymity can make it easier to get away with fraud. To be fair, there is no evidence that Floki Inu's developers are planning a "rug pull" (the cryptocurrency equivalent of a pump and dump). But the platform's hype-based rally and aggressive promotional tactics should be cause for caution. 

Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Ethereum and Tesla. The Motley Fool has a disclosure policy.

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