As of this writing, SafeMoon has not made any maintainers available for comment.
Within 60 days that SafeMoon (CCC:SAFEMOON-USD) existed, it experienced a price increase of almost 3,000%. Many of these early SafeMoon investors hold onto their tokens as they eye this rocket to the moon, and their portfolios are beefed up in the meantime.
But with the model presented by SafeMoon, and the lack of clarity around the project, it has drawn some criticism. Crypto influencers, like Lark Davis and War on Rugs, have repeatedly warned investors about the token’s reward structure and the lack of details regarding its liquidity pool. “Just because you make money with a Ponzi doesn’t change the fact that it’s a Ponzi,” Davis says of SafeMoon.
On April 19, the month-old cryptocurrency became a trending topic on Twitter. He apparently came out of nowhere. Investors don’t seem to care about its mysterious development background, they just care that the token has gone up. What is behind this token? And what is it that drives crypto influencers to denounce it as a scam?
We want our readers to make informed decisions and be aware of the stocks and cryptos that we are hedging. Many of our readers are interested in SafeMoon; after all, this is the most visited crypto page on CoinMarketCap. Let’s dive into what we currently know about SafeMoon.
SafeMoon Crypto: what is it? How it works?
SafeMoon launched on March 8. It is a pledge of the Binance (CCC:BNB-USD) Smart Chain, and was released thanks to a Fair Launch. This means it was a publicly announced launch with no private presale. Its founders made the initial launch on DxSale.
According to SafeMoon, the goal was to make this launch as fair as possible for users. To achieve this “goal”, all tokens in the development wallet were burned. Burning crypto is like burning physical currency; it is destroyed and withdrawn from circulation, reducing the total supply and slightly inflating the remaining symbolic prices.
The developers of SafeMoon tossed the coin with 1 quadrillion tokens. Of that quadrillion, 223 trillion tokens were burned before launch. This means the launch saw SafeMoon’s 777 trillion public release, none owned by developers prior to release. For reference, Ripple (CCC:XRP-USD) The XRP coin has a total supply of just under 100 billion. Cardano (CCC:ADA-USD) The ADA token has a total supply of 45 billion.
Based on the SafeMoon white paper, the developers have a specific plan for the token.
Essentially, SafeMoon’s model rewards those who hold onto their tokens, while punishing those who sell. When selling SafeMoon tokens, they have to pay a 10% fee. According to the developers, 5% of this fee is redistributed to the remaining holders as a reward. The remaining 5% is locked in a liquidity pool.
SafeMoon’s promise is to put investors on a rocket and get them rich fast. “This is my retirement savings,” wrote one Twitter user of his stake in SafeMoon. Future plans, things listed on the company’s roadmap like the SafeMoon Wallet, SafeMoon Exchange, and SafeMoon Games, are an afterthought for now. And looking at the SafeMoon protocol, we can see that the programming currently lacks a basis for these developments.
SafeMoon seeks to create wealth by reducing the supply so that the demand for holder tokens increases. Punishing sellers and burning tokens while rewarding holders with bigger wallets is one way to reduce supply while increasing demand. With the company bringing in 1.4 million holders in just two months, it’s easy to see that there is a demand. And by burning tokens, SafeMoon can increase the price in the most logical way possible. In fact, the company reports that as of April 27, it burned 41% of SafeMoon’s total supply.
Why does the liquidity pool not curb volatility?
One of the cornerstones of SafeMoon is the inclusion of an automatic liquidity pool in its protocol. Liquidity pools serve a dual purpose. First, they prevent a crypto’s value from dropping significantly if it sells. Second, they retain enough liquidity to ensure buyers have access to tokens on decentralized exchanges. The tokens are locked in the pool, to ensure liquidity while creating the floor price. CEO John Karony tweeted that the SafeMoon pool contains around a quarter of a billion dollars in tokens.
The automatic aspect of the liquidity pool, according to the white paper, is that the pool automatically takes tokens from both sellers and buyers. Half of the 10% sales charge is dumped into the pool during the transaction, hence the name. The developers are in control of the pool, and although it is currently locked in, investors have no idea how the funds are secured.
As for the future use of the liquidity pool, investors are uncertain. SafeMoon CEO John Karony said the liquidity pool was intended for “emergency purposes”. He mentions other potential uses like seeding new exchanges accepting SafeMoon, or funding future products, which have yet to be detailed. Crypto YouTuber James Mayo speculates in his SafeMoon video that the pool could likely be burnt.
Despite the liquidity pool, investors are seeing unusual behavior in terms of liquidity and pricing.
SafeMoon’s liquidity is running out, thanks to an offer that is burning quickly. The volume of trade in turn decreases. Investors complain about liquidity errors PancakeSwap (CCC:CAKE-USD), the most popular exchange platform for trading from SafeMoon. But the prices are still deflating. In fact, the token has lost 20% of its value on three consecutive days this week. SafeMoon is currently trading at $ 0.00000516, 63% below the all-time high of $ 0.000014 reached on April 20.
Looking at the white paper doesn’t all add up. Under SafeMoon’s manual engraving model, the price is expected to increase steadily as the supply decreases. However, this model only works with constant interest. Any kind of decline in investor interest can cause the token value to fluctuate downward. This is why the SafeMoon Twitter account, the spokesperson for the company, is largely focused on generating new buyers.
Twitter: the center of the SafeMoon universe
While SafeMoon has grown rapidly since launching on March 8, things really started to improve on April 19. Before #DogeDay, the eponymous celebration of Dogecoin (CCC:DOGE-USD), SafeMoon has started following trends on Twitter. Over the next two days, the SafeMoon account gained 110,000 subscribers and led many to wonder if it took the place of Dogecoin.
And now, SafeMoon continues to amass its Twitter followers. After creating his account on March 1, he is approaching 450,000 subscribers. Karony’s personal account, in many ways an extension of @SafeMoon, has over 120,000 followers.
While Twitter has helped bring SafeMoon to the masses, its social media strategy is rubbing some investors the wrong way. Some investors have complained about the goal of attracting new buyers, rather than sharing updates on planned projects like SafeMoon Exchange and the SafeMoon game promised on the company’s roadmap.
In recent days, the main articles of SafeMoon have focused on the growth of holders, expansion to various global exchanges, and in particular “haters”.
But many users complain about the lack of messages about the token’s utilities. SafeMoon responds to these complaints with promises of upcoming updates. For example, he teased “Project Pheonix [sic]On social networks, but investors are still in the dark. What is this project? And when will the details arrive?
The SafeMoon social media strategy also adds confusion to the issue of liquidity. Despite a growing number of subscribers and buying-focused messages, token prices are stagnating.
The essentials on SafeMoon crypto
So where are you going from here?
For many of our readers, it is clear that SafeMoon is an attractive cryptocurrency. Social media platforms are filled with upbeat SafeMoon holders who see the token as a real ticket to heaven. However, there are still real questions. SafeMoon’s prices are currently stagnating, as are daily trading volumes. It is possible that over-burning coins will reduce liquidity too quickly, preventing new investors from buying.
In fact, this dynamic has sparked high-level criticism of the SafeMoon crypto. A handful of crypto influencers have accused SafeMoon of being a piece of scam. Lark Davis likened the token to a Ponzi scheme. War on Rugs, a leading scam watchdog, is particularly skeptical of SafeMoon, primarily due to developer ownership of the cash pool. Others agree, equating the high transaction fees with the early investor rewards that are present in Ponzi schemes.
SafeMoon went to great lengths to respond to these accusations. More often than not, the company accuses detractors of spreading “fake news” and of trying to sow uncertainty and doubt among investors. They have made efforts to tackle the allegations of fraudulent coins with videos on social media.
At this point, we don’t have a clear picture of the liquidity pool or what SafeMoon has in store for the future. As critics like Davis have pointed out, crypto bulls have been the victim of scams before. But equally true is the fact that little-known altcoins have proven their ability to generate big payouts.
The risk right now is that the volume of transactions and interest will continue to decline and holders will end up with a token of no real use. Who wants to get caught holding the bag?
We will continue to research SafeMoon to answer your questions and help guide your investment choices. For now, keep doing your due diligence and make sure you know exactly what you’re getting into.
As of the publication date, Brenden Rearick does not hold (directly or indirectly) any position in the securities mentioned in this article.