SafeMoon was launched in March 2021 and attracted a lot of limelight after its price hit the roof in April. The cryptocurrency was designed to reward long-term hodlers by charging sellers a 10% fee, half of which goes back to existing hodlers. The other 50% is used in a liquidity pool to maintain SafeMoon’s price stability.
How Does SafeMoon Cryptocurrency Work?
Like other cryptos such as Bitcoin and Ethereum, SafeMoon is powered by a ledger technology known as a blockchain. SafeMoon is based on the Binance Smart Chain (BSC) blockchain and has a market capitalization of more than $865 million (24th September 2021), compared to about $834 billion for Bitcoin (CoinMarketCap).
Blockchain security firm, CertiK, audited SafeMoon and found out that the owners acquire tokens from the liquidity pool, which gives them control over tokens created by the fee. CertiK flagged this aspect of SafeMoon as a major issue in its report and improvement of its security features.
SafeMoon developers manually reduce the amount of SafeMoon in circulation to reduce the supply and increase the prices. The price went up shortly after its launch in March, reaching an all-time high (ATH) of $0.000014 on 20th April (CoinMarketCap). However, it has since dropped by around 80%.
Risks You Should Consider
Like other cryptocurrencies, SafeMoon is a highly speculative virtual asset that has no intrinsic value. Just like any cryptocurrency, there is a possibility of losing your investment if you purchase SafeMoon. Here are the risks you should consider.
Volatility
Since its introduction, the price of SafeMoon went up by more than 20,000% before dipping more than 80% in recent months. Since cryptocurrencies do not have an underlying value, your returns are based on what you can exchange your coins for with someone else.
Regulation
Cryptocurrencies are new in the financial world, and governments are gradually trying to understand what they are and their impact. China was very strong in its position, banning cryptocurrencies earlier this year, pointing at the financial risks the speculative trading. Other forms of regulation could also come in as higher tax rates on cryptocurrency gains.
Speculative Bubble
There are signs that cryptos are in a speculative frenzy. For example, the name SafeMoon seems to have been chosen based on the current buzz to convey an asset that is safe and “going to the moon” instead of having a fundamental purpose. This is one of the flags that investors should not ignore.
Liquidity
For traders who want to capitalize on SafeMoon quickly, the people behind the cryptocurrency discourage selling through the 10% fee and could lead to liquidity challenges. Also, SafeMoon is not yet on major crypto exchanges like Binance. However, one can buy and sell it on Pancake Swap with several cryptocurrencies.
Final Word
SafeMoon is a crypto developed to encourage long-term investment, but it is an extremely volatile asset. Let’s wait and see if it actually ‘lands on the moon.’