Day trader and Barstool Sports CEO Dave Portnoy took a gamble and invested $40K in Safemoon, a new altcoin, admitting he had no idea how it works other than it was one of a “new breed of sh*tcoins” and that it “could be a Ponzi scheme.” Portnoy said he chose the coin because he liked the fact that it had the word “moon” in its name.
Portnoy posted a video on Twitter captioned, “I have no idea how this works” that has received 2.5 million views. In it, he asked viewers to guess which coin he invested $40,000 in based on six hats laid out in front of him, representing six altcoins, which he labeled the “new breed of sh*tcoins.”
An internet celebrity blogger, Portnoy is the founder of the sports and pop culture blog Barstool Sports. “Don’t trust anything I say about stocks,” he disclaimed in the video.
Safemoon ranked as the No. 46 coin by market cap at $2.94 billion as of this writing, according to crypto data aggregator CoinGecko. It was trading today at $0.00000502 per coin, down 52.9 percent from its May 11 all-time high of $0.00001094.
Many influential members of the crypto community are calling out Safemoon a pyramid scheme and get-rich-quick scheme with no real purpose other than to enrich early adopters, Australian news service Stockhead.com reported.
While most cryptocurrencies try to minimize transaction fees to encourage real-world adoption, Safemoon charges sellers a hefty 10 to 12 percent penalty to withdraw their funds. Half of that is burned (destroyed), and the other half is redistributed to existing tokenholders, encouraging them to hold onto the coins, according to the report.
“I’m pretty convinced this is a pyramid scheme and that you will lose your money if you get in right now, because this is a scam that is growing faster than everything I have ever seen before,” Dutch YouTuber Quinten François said in a video.
A Ponzi scheme is a fraudulent investing scam promising high returns with little risk to investors. It generates returns for earlier investors with money taken from later investors, similar to a pyramid scheme, in that both are based on using new investors’ funds to pay the earlier backers.
Portnoy could have chosen to invest in Dogecoin, Litecoin, Shiba Inu, HOGE and, Australian Safe Shepherd.
A decentralized finance token, Safemoon has the tagline “Safemoon to the Moon” according to its website — a similar slogan used by Dogecoin fans, Markets Insider reported. “To the moon” has been touted by high-profile crypto enthusiasts including Tesla CEO Elon Musk.
During his video presentation, Portnoy discussed why he chose Safemoon. “I like the word ‘moon,’ because that’s where I want to go,” he said.
“Are you kidding me?? You just supported the biggest scam in the entire crypto space,” @WSBChairman responded on Twitter.
Gold bug Peter Schiff also had some fun with Portnoy’s theatrics. “That’s as good a reason as any to buy a crypto. You gotta love the name. It’s safe and it’s going to moon! What more do you need. Since there’s no substantive difference between #Bitcoin and #SafeMoon, maybe Bitcoin crashes back down to earth as SafeMoon blast off to the moon!” Schiff tweeted.
Portnoy also said in the video that he will never sell his Bitcoin holdings, although that’s exactly what he did in August 2020 when the price of a Bitcoin was around $11,000, Bitcoin.com reported in a Feb. 20, 2021 report. Portnoy bought his first bitcoin on Aug. 13, 2020, when the Winklevoss twins, who are his neighbors, visited him and personally walked him through how to buy Bitcoin on their crypto exchange Gemini. Portnoy invested $200,000 in BTC that day. The price was around $11,172, according to markets.Bitcoin.com.
Portnoy later admitted that he was an idiot about Bitcoin as the price continued to skyrocket, hitting multiple all-time highs. “At least I know I’m an idiot, alright,” he tweeted.
In His May 17 video, Portnoy declared himself “The Baron of Bitcoin.” He vowed that he will never sell his Bitcoin.
SafeMoon could be vulnerable to hackers due to security vulnerabilities in its smart contract code, CoinTelegraph reported on May 25. A smart contract audit by blockchain security firm HashEx found that SafeMoon has 12 areas of vulnerability with five classified as “critical” to “high-severity”.
According to HashEx, the SafeMoon contract owner is an externally owned account, or EOA, that controls a significant proportion of the coin’s liquidity, making SafeMoon vulnerable to a “Temporary ownership renounce” attack and rug pull to the tune of $20 million. A hacker could drain the liquidity pool.
SafeMoon told Cointelegraph that its contract ownership is securely held. The team is aware of the issue and has policies in place to ensure that the owner wallet is never connected to any third-party decentralized applications, according to CoinTelegraph.
Listen to GHOGH with Jamarlin Martin | Episode 74: Jamarlin Martin Jamarlin returns for a new season of the GHOGH podcast to discuss Bitcoin, bubbles, and Biden. He talks about the risk factors for Bitcoin as an investment asset including origin risk, speculative market structure, regulatory, and environment. Are broader financial markets in a massive speculative bubble?
#1 Macroeconomic Newsletter For Black America