While investing in crypto, investors should be aware of crypto shillings, which are among the greatest traps for cryptocurrency investors and owners.
If you come across phrases like “the best cryptocurrency,” “Invest now, before prices surges,” “get your hands on the best ever cryptocurrency,” “buy the dip before you are in the dip” or any other buzz statements on social media posted by influencers, it might be a sign of crypto shilling.
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Let’s dig deeper into what crypto shilling is, whether it is legal, and how to identify it to make an informed and safe decision about crypto investments.
What Does Shilling Mean?
The word shilling was the name for English coins in the 17th and 18th centuries. “To Shill” is also a term used in casinos and is interpreted to mean “stooge.” Shilling in a casino means that a gambler plays using the casino’s money to keep the games going when there are not sufficient players.
Crypto shilling could be defined as the advertising of a cryptocurrency or project by a particular person or group that has status or reputation among the online community. It’s typically done by social media influencers on different online platforms. In most case scenarios, the influencers receive payment for advertising the crypto.
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Crypto shilling is all about creating hype. When the public interest in crypto projects rises, investors flood the project, and eventually, it results in mass buying. Higher demand results in spikes in the crypto token price.
While advertising crypto projects is not necessarily an evil thing, shilling can have a bad rap, as it can be used to promote scams. The project that was shilled can end in a harmful practice known in the crypto world as a “rug pull.” During the maneuver, crypto developers abandon a project and run away with investors’ funds.
How To Identify Crypto Shilling?
As the common rule, genuine promoters of cryptocurrency projects should show that they are in it for the long run. Also, they never use pretentious advertisements or deceptive endorsements. Proponents should maintain complete transparency regarding the details of financial incentives. There are a few red flags to look for that could help to identify crypto shilling.
1. Be careful with influencers
First of all, investors should be careful with influencers who promote relatively unknown crypto.
Also, they should take the influencer’s words with a grain of salt if the socialite was not so into the cryptocurrency market before and has suddenly promoted specific crypto. This could mean that celebrity is getting paid for the promotion, and they don’t have any real insight into the project.
Before actively encouraging people to invest in the project, influencers need to be well-informed about it. If the celebrity cannot showcase their reasons for supporting the project, the investor should pass on it.
2. Beware of marketers or investors pushing specific crypto.
Another type of shillers are prominent businessmen or professional investors in other markets investing in specific crypto. These individuals invest in cryptocurrencies themselves. Through crypto shilling, they seek to create the hype for others to flood in and invest as well. Once the cryptocurrency reaches a wanted price tag, the shiller will sell out one’s assets, making the price fall, taking down together the new investors. This scheme is often known in the crypto world as “pump & dump.”
What red flag should you look out for? Such shillers tend to stress the potential profits for investors more than they focus on the use case and functionality of the blockchain powering the project or token.
3. Founder or team members of crypto project endorsing their tokens
The team will advertise their crypto project to generate hype. Attention brings funding. Also, they may also do this to take away attention from rival cryptos. That’s a natural process and not necessarily malicious. However, the investors should be able to recognize if the person is overselling their project.
What are the red flags here? Investigate the whitepaper and roadmap of the project thoroughly. If the founders are overselling their project without a well-documented whitepaper with clear utility, it might mean that there is more hype and hurry than actual function and value.
Is Crypto Shilling Legal?
In conventional financial markets, shilling is illegal. However, the laws governing cryptocurrencies are still being developed. As there are no strict regulations for cryptocurrencies yet, what constitutes a legitimate or unlawful promotion is uncertain.
Some crypto PR agencies officially offer shilling services to promote NFT and crypto projects through celebrity and telegram endorsement campaigns.
Some open lawsuits are suing the celebrities promoting crypto. In addition, authorities protecting customers’ rights are targeting the shilling cases. For example, Truth in Advertising (TINA.org), a watchdog organization for consumers’ rights, has accused 19 celebrities of endorsing NFTs without declaring their affiliation with the projects.
However, crypto shilling is still in a grey area.
Examples of Crypto Shilling
One of the widely known crypto-shilling examples is Kim Kardashian. Kim Kardashian promoted to her 230+ million Instagram followers an Ethereum MAX (eMax) token. Ever since that post in June 2021, EMAX has tanked spectacularly. However, the token turned out to be a scam. As the celebrity has nothing to do with investing in crypto, she most likely got paid for the promotion.
Another prominent example of crypto shilling is Elon Musk. Even though Dogecoin is not a scam and the businessman is not getting any direct profit from his promotional activities online, his shilling for Dogecoin (DOGE) is influencing the crypto market.
Whenever Elon tweets something related to Dogecoin (DOGE), the coin’s price jumps substantially. The meme coin skyrocketed to a record-high price of 74 cents, thanks to Elon’s activities on social media.
