Since the creation of ERC20 tokens and the Initial Coin Offering (ICO) craze that immediately followed, there has been a lot of startups that are giving away free tokens via Airdrops. Some became profitable but there are also some that did not even reached an exchange listing.
Nowadays, we have to rely on trusted sources to earn cryptocurrencies. This article aims to give a quick explanation on how a token value is determined. This can also be helpful to avoid scams and potential threats to your crypto holdings.
Why Does my Token Have no Value?
Here are some of the common reasons. Read and familiarize yourself.
Not Trading Yet
In order for a coin or token have some kind of monetary value, an exchange has to list it first. There are even some ICOs that include this on their roadmap. Traders determine the price of the crypto and other users are given a way to acquire the tokens. With Trust Wallet, a token price is determined once it appears on CoinMarketCap, Coingecko or from other providers.
Learn more here: Where Does Trust Wallet Get Coin Pricing Data From?
No Trade Volume or Liquidity
Once a token is already actively being traded, then value is determined and the app can show it properly. If there is low volume or liquidity on the exchange where the token is listed, this will immediately affect the price. It will cause the price data providers to get accurate data from exchanges and may even result to having them delisted on these exchanges.
In a dump airdrop, the goal for the developers is to generate short-term buzz about a token so that people will be eager to buy it when it hits exchanges. The developers quickly sell (dump) all their tokens and they just disappear and the project becomes inactive. So be always careful on what you buy on exchanges. Always do your due diligence first before investing into some project.
There has been a number of scams via Telegram bots wherein Fake tokens are being sold or given out to unsuspecting users. Some of them resemble tokens that are already trading or even those that are still on an ICO stage. The best way to determine fakes is to know the contract address of the Fake tokens.
How to Spot a Fake Token
You can easily determine this by searching for the token address on Etherscan. Things that you need to look for are the following:
- There is only a few holders
- No token logo or looks different from the real one
- No price value showing
Here is an example of a fake USDT token
The real USDT token