Launched in the spring, safemoon has become the latest cryptocurrency to make the headline
The crypto exchange Coinbase has reported a 910% in its share price in the space of four days in mid April.
This article will explain everything we know so far about safemoon, including:
- How safemoon works
- How to buy the tokens
- Whether safemoon is a sound investment
The rise of safemoon
Coming hot on the heels of digital currencies such as bitcoin, cardano and dogecoin, safemoon is the latest cryptocurrency to be attracting attention from investors.
Despite only launching in March this year, the altcoin already has more than two million users investing in safemoon.
On April 20, the crypto exchange Binance had to suspend withdrawals temporarily because it was inundated with investors in safemoon. Binance has now been blacklisted by the financial regulator.
In early May, the market information firm CoinMarketCap reported that safemoon was on more users’ watchlists than bitcoin – at just over 1.3m, compared to 1.2m.
What is safemoon?
Safemoon, the latest cryptocurrency, describes itself as a decentralised finance (DeFi) token. This means it is part of an alternative financial system, enabling trade on peer-to-peer chain networks without the intervention of centralised systems such as banks or governments.
Like bitcoin and other digital currencies, it operates on a blockchain network.
However, the key difference between a safemoon token and other cryptocurrencies is that investors are encouraged to hold, not sell their tokens.
Safemoon fees
- Anyone who sells safemoon coins will be hit with a 10% fee, half of which will be paid by way of a dividend to current investors.
- Safemoon’s founders say the idea behind this sale penalty is to discourage day trading and iron out the significant price volatility suffered by other cryptocurrencies.
- They claim that investors are shooting safely to the moon with the currency but it will take time to get there.
The safemoon price at the time of writing, on May 24, was a fraction of a dollar: $0.000004563, according to CoinMarketCap.
The price of a single token peaked on April 20 at $0.00001399 following a single-day 99% surge.
This also means there has been a 33% fall since then and suggests that the founders’ measures have yet to bring the price rollercoaster under control.
Find out more: I made £8,500 from bitcoin
How to buy safemoon in the UK
Buying safemoon in the UK is not a straightforward process, but it is possible.
In order to do so, potential investors must first set up a crypto wallet on the Binance crypto exchange and then buy binance coins. These can subsequently be exchanged for safemoon coins.
Bear in mind that Binance is not allowed to carry out regulated activity in the UK. Also remember that your money isn’t protected if anything goes wrong.
Where to buy safemoon:
- Download the Trust Wallet App – available on App Store, Google Play or Android.
- Purchase one of two available established cryptocurrencies: binance or bowscoin.
- Click on the DApp tab on the Trust Wallet app, which enables you to find decentralised applications and look for PancakeSwap.
- PancakeSwap lets you exchange binance or bowscoin for safemoon tokens.
- Safemoon tokens are then held in Trust Wallet.
Should I invest in safemoon?
As with all digital currencies, investing in safemoon is high-risk and should only be considered by investors who:
- Understand cryptocurrencies
- Have conducted extensive research
- Can afford to lose their stake
It certainly isn’t mainstream investments in cryptocurrencies, to be relied upon for building a nest-egg or for funding retirement.
Is safemoon a good investment?
Despite the desire to achieve some stability through the fees levied on investors who sell their tokens, there has still been substantial price volatility.
This means that investors could have made both impressive gains and staggering losses, depending on your financial situation.
Investing in cryptocurrency is a bit like gambling so don’t invest your entire life savings in this asset class.
Is safemoon safe?
As with an investment in stocks and shares, or other currencies, the value of a safemoon coin could fall. If investors were to sell on the back of a fall, they would not only incur capital losses but also a 10% penalty.
Critics also argue that this incentive to remain invested makes safemoon not so different to an old-fashioned pyramid or Ponzi scheme, with existing investors reliant on new entrants to boost their gains.
Added to this is that investments in cryptocurrencies are not regulated in the UK. Although the founders of safemoon have held “Ask Me Anything” sessions to answer potential investor questions, it is no substitute for proper consumer protection.
In January this year, the Financial Conduct Authority warned consumers about the risks of investing in crypto assets that advertise high returns. The warning came after the price of bitcoin hit unprecedented highs over Christmas, doubling its value in less than a month.
The Financial Conduct Authority highlighted a number of concerns, including:
- A lack of consumer protection beyond basic anti-money laundering measures. Investors are unlikely to be able to call upon the Financial Services Compensation Scheme – which protects up to £85,000 of an investor’s money if a provider goes out of business – or the Financial Ombudsman Service.
- Extreme price volatility. The regulator advised that this, in addition to difficulties in accurately valuing crypto assets, increases the risk of losses.
- The complexity of crypto assets makes it very hard for consumers to properly understand the risks of investing in them.
It is also important to note that it may be tricky for potential investors to convert holders of safemoon – or any other cryptocurrency – back into cash, with no guarantees that the market will offer the liquidity that investors want.
Could safemoon rival dogecoin?
The media is certainly talking about a dogecoin-safemoon rivalry.
Dogecoin has enjoyed surging popularity in recent weeks thanks to its most prominent proponent, Elon Musk.
The entrepreneur recently stated that his electric-car company, Tesla, would stop accepting bitcoin as payment for vehicles, amid concerns about the damage to the environment caused by the “mining” of the world’s biggest cryptocurrency.
That furore resulted in a huge crypto sell off, but thanks to Musk’s support, dogecoin shot up 15% after a recent slump.
At the time of writing, however, its value had slipped again – highlighting the volatility of cryptocurrencies.
Dogecoin – at the time of writing – was the sixth-largest cryptocurrency in the world, with a market capitalisation of over $44bn (£31bn); safemoon’s market cap was under $3bn, so it is tiny in comparison.
Nonetheless, at this stage in its trajectory – dogecoin was launched in 2013, by comparison – its potential for growth seems greater.
The future of safemoon
Digital currencies analysts appear to be cautiously optimistic about the safemoon price.
WalletInvestor predicts that the value of a safemoon coin will rise to $0.000051 in one year and up to $0.000237 in five years. Digital Coin, meanwhile, puts its safemoon prediction at $0.00000870 in one year and $0.00001690 over five.
However, these are of course just predictions – and if a glance at any crypto price chart can tell you one thing, it’s that it is likely to be a very bumpy ride.
It is also arguably too early to tell what impact safemoon’s sale tax will have on potential investor appetite.
