Why FLOKI Is Up 275% This Week

Floki Inu is targeting people who feel they missed out on Dogecoin. Here's why there are better cryptocurrencies to buy.

The meme coin makers are having a field day right now. Tesla CEO Elon Musk, the infinitely memeable hero of the infinitely memeable Dogecoin (DOGE), has his own Shiba Inu puppy. It's called Floki. And as a result, there are now more than 20 Floki-related coins listed on CoinMarketCap.

So far, Floki Inu (FLOKI) is leading the puppy pack. With a slogan of "Missed Doge? Get Floki," the coin is unashamedly playing on people's fear that they missed the Dogecoin bus. Speaking of buses, the ad has recently been emblazoned across buses and other forms of public transportation throughout London.

Puppy power

The ad campaign has had the desired effect. Floki Inu has grown 275% this week. Floki Inu ranked in the top 3,000 cryptocurrencies by market cap, ahead of Baby Floki Doge and Floki Elon. Though it still has a way to go if it's to succeed in its stated goal of becoming a top 10 crypto and kickstarting the next crypto revolution.

Floki Inu claims to be more than a meme coin -- apparently, Floki Inu is a "movement." But it's difficult to see how a coin based on a billionaire's puppy could be anything but a meme coin, no matter how big its social media following.

Why I'm cautious about Floki Inu

There are many reasons to be extremely cautious about buying Floki Inu. First, it's a shameless Dogecoin wannabe that's trying to capitalize on investors' fears that they missed out. That's never a good rationale for any investment.

Dogecoin, which is based on a popular meme of a Shiba Inu dog that spoke in clipped sentences, was created as a joke and did not have any real-world utility. Nobody expected it to reach such extraordinary levels of success and popularity. Especially since it was intended to parody the way people bought into cryptocurrencies they didn't fully understand.

But when Dogecoin produced eye-watering returns against the odds, two things happened:

1. It reinforced an idea that traditional investment logic didn't apply to crypto.
2. Hundreds of imitation Dogecoin cryptocurrencies were born.

As a result, we're seeing a pet coin frenzy, where people hope to get rich by investing in a host of coins that don't actually do very much. Floki Inu is one of them -- and that alone is a good reason for caution. But here are some other warning signs.

1. Its so-called "well-respected industry figures" are mostly anonymous

According to the Floki Inu whitepaper, "The Floki Inu team is composed of several large crypto influencers and well-respected industry figures, like B, PetaByte Capital, Sabre, and MrBrown Whale who put their reputations on the line for this project."

But if you hunt for these people, you'll find many of them only exist on Twitter. And don't be misled by the name, PetaByte Capital is not an investment fund. The coin's founders are still anonymous, which is a red flag for any new crypto project. Knowing who is in charge and what their background is gives you a sense of whether a project can be trusted to deliver.

2. You'll be charged for every trade

There's a "marketing tax" of 3% on all FLOKI trades. According to the whitepaper, this tax goes first to the coin's marketing efforts and second to develop the Floki Inu system. That's a pretty hefty fee -- especially as you'll pay it when you buy and when you sell. So, let's say you buy $100 worth of FLOKI on decentralized exchange, Uniswap. You'll pay $3 on top of the transaction fee. And then you'll pay another transaction fee plus another 3% when you want to sell.

I'm also concerned by the emphasis Floki Inu puts on marketing. Call me old fashioned, but it seems like they're putting the horse before the cart. Cryptocurrencies that can have a real-world impact and are likely to stand the test of time put their efforts into technological and product development before they take out expensive advertisements across the world.

3. It isn't available on major cryptocurrency exchanges

You can only buy FLOKI on decentralized exchanges like Uniswap and PancakeSwap. Decentralized exchanges don't need a middleman to facilitate coin swaps, and they often don't have the same anti-money laundering systems in place.

The coin is not listed on top centralized cryptocurrency exchanges, which makes it more complicated and often more expensive to trade. Not being listed is not a red flag in and of itself -- there are thousands of coins out there and many aren't available on the big platforms. But there are different risks involved when using decentralized exchanges, and investors need to tread carefully.

All cryptocurrency investments have risks, but Floki Inu is an especially risky investment. People may want to speculate that the heavy advertising and social media activity will push the price even higher. But long-term investors would do better looking for projects that have real-world utility and could grow in value over time.