Cryptocurrencies are here to stay. There -- I said it.
The big names in the space are attracting serious interest from institutional investing firms. Governments around the world are grappling with the legal and regulatory future of decentralized finance systems. Crypto investors and enthusiasts envision lighting-fast, low-fee payment alternatives, digital banking apps with ultra-personalized feature sets, and radically different solutions for copyright, asset management, and automated contracts.
Many of the leading cryptocurrencies make sense as investments in this rapidly evolving market. Ethereum has firmly established itself as the leader in smart contracts, boosted by an ambitious list of recent and upcoming technical improvements. Bitcoin remains the gold standard for hard-to-hack value storage. And if Web3 is the future of the web, then Polkadot should become the best way to take advantage of many different cryptocurrencies in a single app or service.
And that's not all. Even some of the seemingly silly crypto ideas may be able to find useful niches in the long run. Dogecoin may be a literal joke, but its platform is a technically sound clone of Bitcoin with minor tweaks that trade in some of Bitcoin's unbreakable security for swifter transaction processes. Shiba Inu is a social project-management experiment wrapped in adorable marketing and paired with the sophisticated ShibaSwap trading platform. Both Dogecoin and Shiba Inu have seen their market values soar and swoon due to social media posts and other factors that have no real connection to any form of business value. But what if they could overcome their "silly fluff" labels and be judged on their technical merits instead?
So I'm not here to tell you that Shiba Inu or Dogecoin are worthless gambles. I mean, they are far from my favorite crypto names today, but they just might be able to earn their stripes in the long run. I wouldn't dare to bet against them.
Still, I really wouldn't touch a few popular cryptocurrencies with a ten-foot pole. For example, here's why I think you should stay away from Terra Classic (CRYPTO: LUNA) and Pepe (CRYPTO: PEPE).
Image source: Getty Images.
What's wrong with Terra Classic?
You might recall the TerraUSD meltdown of 2022. The algorithmic stablecoin now known as Terra Classic USD lost its tight connection to the desired price of $1 per token. The coin's backers tried to prop up the stablecoin by buying more Bitcoin and other cryptocurrencies, but crypto prices were already crashing due to the broader economy's high inflation and the Fed's interest rate hikes, so those desperate efforts failed.
Investors lost their trust in TerraUSD. Mass withdrawals led to a thundering crash, and TerraUSD fell all the way down to $0.006 per token. Remember, this digital currency was supposed to serve as a drop-in replacement for good old American dollars with a price that held tight to the $1 mark.
That crisis poured more fuel on the fires that were already pressuring the crypto market at the time. For example, Bitcoin dropped from $38,000 to $29,000 amid the TerraUSD collapse.
The backing Terra blockchain was relaunched with the hope of rebuilding what was lost in the TerraUSD crash. So far, Terra 2.0 appears to have a healthy list of decentralized finance projects under development, but I don't see a revamped version of the TerraUSD stablecoin.
The Terra Classic coin represents the fading embers of a once-thriving but now utterly failed and forgotten project. Its price hovers around the $0.0001 mark, or 100 Terra Classic tokens per American penny. The related stablecoin is doing slightly better, with prices floating just above $0.01 per purported digital dollar.
Terra Classic may sound like a vintage cryptocurrency with a solid future, but nothing could be further from the truth. Speculators might try their hand at the relaunched Terra (LUNA) coin instead, but the Terra Classic iteration is just the residue of a dead project. Its price moves up or down for no good reason on a daily basis, and will almost certainly drop to zero in the long run.
Image source: Getty Images.
Why doesn't Pepe look like a serious investment?
I mentioned Dogecoin and Shiba Inu earlier, but there is a long list of even stranger meme coins. Pepe is the most popular of these right now -- and I see no reason to take this one seriously.
Pepe is an Ethereum-based ERC-20 token, just like Shiba Inu. The coin also relies on classic internet memes for its branding and marketing. But that's where its similarity with Shiba Inu ends.
Its official logo is Pepe the Frog, a roughly sketched cartoon that has taken on unpleasant political overtones over the years. That the developers of a new cryptocurrency would choose to tether it to such a controversial meme is only the first of many red flags when it comes to Pepe.
The coin's official web page offers another warning signal. The antivirus features of my network router won't let me see that page directly. Many online security specialists flag it as suspicious, citing its similarity to known scam sites.
Digging into the site through safe Internet Archive snapshots, I found a three-phase operating plan that culminates in selling Pepe merchandise amid a "meme takeover." Here is how the project describes itself:
"PEPE is a meme coin with no intrinsic value or expectation of financial return. There is no formal team or roadmap. the coin is completely useless and for entertainment purposes only."
I could go further, but that should be enough. Pepe's developers don't have any grand ambitions to launch successful decentralized finance services, nor to have the tokens gain value over time or serve any useful purpose. It's the Dogecoin joke again, but taken to the next level of pointless speculation.
Image source: Getty Images.
The world of cryptocurrencies is diverse and dynamic. Some would call it chaotic. Still, there are levels of clear separation between different classes of crypto investments.
Robust coins like Ethereum, Bitcoin, and Polkadot are carving out substantial roles in the digital economy. One step down, the likes of Dogecoin and Shiba Inu are proving that even "joke" currencies just might find niches in the long run.
However, not all that glitters is digital gold. Cryptocurrencies like Terra Classic and Pepe serve as reminders that careful research and due diligence are essential before investing. There are landmines and hidden dangers all over this market. Make sure that your crypto investments match your risk profile, and don't put your money into digital assets without digging into each coin's fundamental value and future prospects.
