With additional reporting by Brenden Rearick
On April 20, SafeMoon (CCC:SAFEMOON-USD) overtook Dogecoin (CCC:DOGE-USD) as the top-searched cryptocurrency in the world. The one-month-old DeFi token had all the makings of a breakout success: a large social media following, a function that penalizes sellers, and a rapid return to satisfy even the most demanding moonshot investor. $10,000 invested in SafeMoon in March would have turned into over $2 million by mid-April.
But as the old saying goes, “up like a rocket, down like a stick.” As more Twitter (NYSE:TWTR)-fueled investors piled in, prices inexplicably collapsed. In just two weeks, $8 billion of investor money has vanished.
That hasn’t stopped investors from doubling down. The token still adds almost 20,000 new holders daily, and current stakeholders are strident as ever. To these believers, SafeMoon has “more potential than Dogecoin.” Skeptics are derided as “FUD” mongers — sowers of fear, uncertainty and doubt.
It’s easy to dismiss these SafeMoon bulls as one-off fanatics. The community almost seems to have a life of its own.
Yet, SafeMoon investors only reflect a broader acceptance of “cult stock” investing — a notion popularized by Tesla (NASDAQ:TSLA) and GameStop (NYSE:GME). Much like conspiracy theorists, many investors join exclusively for the community. Profits are seen as a vindication of one’s beliefs rather than the outcome of any logical investment strategy.
As social media influence continues to grow, investors can expect to see more hustles like SafeMoon. Because in a world where 1.5 million investors can believe in a cryptocurrency that is “solely built to gain attention,” smart operators will have no trouble finding their next marks.
Investors beware. The SafeMoon crypto hustle of 2021 is only the start of things to come.
The Rise of SafeMoon
SafeMoon started with an intriguing principle. Rather than allow investors to sell their tokens freely, the protocol instituted a 10% “exit tax” on would-be sellers. Not only would that reduce the chance of people selling when prices declined — an issue that long troubled the Dogecoin community. It would also redistribute half of the exit tax to existing holders.
In theory, the system would reward long-term SafeMoon holders at the expense of disbelievers (i.e., sellers). Cryptocurrencies like Dogecoin turn over their entire market capitalization every few days. At that rate, SafeMoon investors would theoretically double their tokens each month.
Concurrently, the DeFi token launched a slick marketing campaign on Twitter and other social media platforms. These increasingly elaborate posts were aimed at garnering grass-roots interest. With some luck, SafeMoon’s marketing team could get their investment community to do their work for them.
The plan worked. Within six weeks of its March 8 launch, the token had amassed 100,000 Twitter followers. By late April, SafeMoon would reach an all-time high, driven by influencers from YouTube star Jake Paul to DJ Afrojack. NFL players Damarious Randall and Sidney Jones IV also weighed in.
The Dark Side of the (Safe)Moon
Yet, SafeMoon’s rise also raised eyebrows. On April 21, cryptocurrency influencer Lark Davis called the new token a Ponzi Scheme.
“SafeMoon is worth almost 7 billion fully diluted,” Mr. Davis noted. “…Seems that scams always pump the hardest.”
A day later, controversial cryptocurrency watchdog War on Rugs issued its first warning on the currency.
“Scam Advisory #115 – SafeMoon. Reason: Owner owns more than 50% of the liquidity and refuses to fix it. He could pull LP and sell tokens, creating a rug pull. Likeliness of losing all funds: Absolute”
Central to these accusations were allegations of fraud and misdirection – claims that third-party audits of SafeMoon’s code have since justified.
- Self-Dealing. Since March, the official SafeMoon Deployer account has sent…