Bitcoin (BTC-USD), Ethereum (ETH-USD) and other solid crypto projects are worth investing in for the long-haul. This is due to the technical innovations they provide with their underlying technology. It is also due to the ecosystem of payments and applications they support. These cryptocurrencies have increasingly become viewed as a store of value. There’s plenty of capital now flowing into spot ETFs and other products aimed at institutional investors. That said, the list of cryptos to avoid is growing. Consider this further as valuations surge across this sector, disproportionately (positively) affecting certain meme tokens I think are getting overly pricey at the present moment.
There are plenty of meme tokens to choose from that could have made this list. While speculators continue to largely be successful in their portfolios, at least of late, these are three tokens that could have significant downside if yet another crypto winter shows its face.
Here are three cryptos to avoid, for those taking a more cautious approach to the markets right now.
Shiba Inu (SHIB-USD)
Before the market closed on June 7, dog-themed crypto Shiba Inu (SHIB-USD) saw an 8% decline. It was trading at $0.0000234 due to crypto market sell-offs. The decline was triggered by stronger-than-expected May jobs data and accelerated after “Roaring Kitty” Keith Gill’s uneventful livestream.
Since late May, the dog-themed token has traded poorly, peaking at $0.00002940. June has started off with a bearish tone, with SHIB recording only two positive days. From a technical analysis perspective SHIB is approaching a key resistance level. Investors hope will hold up as support.
Now, Shiba Inu is up significantly off its most recent lows. There’s a case to be made that a meme rally in the stock market could certainly affect this token’s price. If this support level holds up, it’s possible investors could seek to add to positions. This way they could take advantage of a risk-on environment.
However, for those who believe more downside could be ahead for the most speculative assets, Shiba Inu’s relative lack of utility and highly speculative nature make this a project I think is worth avoiding. Make the right play and make sure this is one of the cryptos to avoid.
Pepe (PEPE-USD)
Pepe (PEPE-USD) is associated with the semi-controversial “Pepe the Frog” web cartoon. The token is a project many have long considered a classic pump-and-dump scheme. The coin offers no real value to holders and relies on hype generated by a dedicated group of followers. The hope is that they may surge during risk-on rallies. This sort of speculative upside potential is what makes Pepe so appealing to so many. However, it’s also what makes the token among the riskiest in the market.
Short liquidations have picked up since March, driving significant upside in Pepe. But with the token now down off of its May peak, and the liquidation and short covering catalysts likely out of the way, it’s unclear whether there will be enough capital available to take this token to the next level.
Fundamentally, Pepe is similar to the other tokens on this list from a utility perspective. I think projects that provide users with real-world benefits are the ones that are most likely to be durable and successful over the long-term. Accordingly, I’d suggest investors consider other large-cap projects instead, and view this top-25 crypto as one of the riskiest buys in this current environment for this reason.
Floki (FLOKI-USD)
Another top meme coin, Floki (FLOKI-USD) has provided investors with significant return, thanks to its devoted fan base. Despite being a niche project named after Elon Musk’s dog, Floki boasts a $2.6 billion market cap, which many have justified by its blockchain presence and seeming utility in the metaverse and DeFi. However, its valuation, driven by the greater fool theory, is tenuous, making this token ultra-risky for new investors.
In March, FLOKI surged to $0.0002964, its highest in two years, but the rise was short-lived, with the token’s price declining through April. As market conditions improved, FLOKI peaked at $0.0003085 before declining again, impacted by a stock market tumble. Despite positive market sentiment, Floki has seen sharp and sudden declines in the past, making this among the more volatile meme tokens in the crypto sector (and that’s saying something).
For those who believe the next long-term bull market in crypto will be driven by fundamentals over hype, this is yet another meme crypto to avoid right now.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
