With the cryptocurrency industry catching investors eyes, it is important to distinguish scams from legitimate companies. On the previous post about ICOs, we discussed the steps and importance of conducting research before investing. GladiaCoin is a great example of a company that does not satisfy the important components: team, mission, social media, and history. After a thorough analysis, it became clear the company was showing signs of a ponzi scheme.
What is a Ponzi Scheme?
A ponzi scheme will attract investors with claims of high returns. The investors who first enter will receive their money from other investors entering the company later, which becomes a cycle that eventually ends due to lack of new investors or people trying to withdraw funds. Once the company notices the cycle ending, they will usually leave with all of the remaining money and shutdown. As a result, investors lose their money and feel robbed.
GladiaCoin claims to “Double your Bitcoins in just 90 Days!” While this certainly seems like an exciting investment opportunity, we should first use the four components as a guide to evaluate whether this is a great investment or not.
First, let’s find out who the team is and what their background experience is in the blockchain industry. As we review the page, there is no tab for “Contact Us” or “Team”. This is not a great sign, as when you are investing money, it is a must to know who is in control of the funds. While this is not a great start, we can move on to the mission.
GladiaCoin claims to “double your bitcoin in 90 days” through arbitrage. Arbitrage is the process of purchasing and selling an asset by exploiting an immediate difference in price. While it is great that you can double your bitcoin in 90 days, this does not seem sustainable in the long-term. Arbitrage is only possible with inefficiencies in the market. If you have a company doing this on a large scale, it only makes sense that the inefficiency in the marketplace will diminish. Therefore, the business model is not sustainable.
At this point, I would not even consider investing my Bitcoin in GladiaCoin, but for fun let’s analyze their social media page and history of the company. Their Twitter page has six posts, with two regarding the Bitcoin value and the other four about how to sign up and explaining what Bitcoin is. Where are the current events, opinions, and relevant retweets about the blockchain industry? Moreover, their first post was on April 10, 2017, which gives a great signal of how the company has not been around for very long.
With this all in mind, we can now see the overlaps in a ponzi scheme and GladiaCoin. As with any ponzi scheme, there is a shutdown and end to the cycle of returns for investors. After speaking with a customer about their experience, the unnamed Gladiacoin investor said, “After my first month of steady payments from GladiaCoin, I received an email from the company explaining how there was a halt in payments, and in order to keep receiving payouts a 15% ‘maintenance fee’ had to be paid.” While this individual was able to effectively receive their money back in terms of USD investment due to the rising price of Bitcoin, not all customers were so lucky. Moreover, the individual lost bitcoin and profits from the increase in value of the currency.
GladiaCoin is not only a company you shouldn’t invest in, but it is also a representation of all ponzi schemes you should avoid. When investing, make sure to investigate the team, mission, social media, and history components. As is true in all facets of life, if the opportunity seems too good to be true, chances are that there is something amiss.