Are you Investing in Safemoon? Here’s what you need to know

• A recap to a time when Safemoon was the golden goose for many crypto-investors
• A look at its collapse and what anyone looking to invest in Safemoon should consider

So, are you thinking of investing in Safemoon. Why wouldn’t you? I mean, it has the word “moon” in it so, it is probably going to the moon during the next bullish cycle, right? Well, it is not always that straightforward.

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Some due diligence would be ideal before you go investing in Safemoon. The latter is a DeFi project which exists for the same reason why Bitcoin and Ethereum exist. To provide a decentralized finance DeFi option that eliminates third parties. It had a very strong start in 2021, likely due to good timing. Alas, its success was short-lived.

SFM’s market cap peaked at $5.1 billion in May 2021 at the height of the previous bull run. This underscores the project’s strong start as it managed to secure heavy investment. It has since lost most of that market cap since the start of crypto-winter. Understanding why it gained such a large market cap and why it lost it may offer insights as to whether investing in Safemoon is still a good move.

Source: Coinmarketcap

Part of Safemoon’s initial success was due to how it was marketed. What set it apart from most top cryptocurrencies is that the project claimed to implement measures that would discourage speculative trading and encourage long-term hodling. It aimed to do this through a 10% tax on every sale, thus the incentive part.

The project aimed to share half of the amount collected from the 10% fee with Safemoon holders while the rest of the funds would be burned, thus lowering the circulating supply over time. This type of tokenomics was quite attractive to investors, hence the strong demand in its early days.

Speculative trading injected heavy volatility in the market. Buyers that took advantage during the 2021 rally saw Safemoon as an opportunity to jump on the long-term opportunity that the project promised. Unfortunately, that hype was short-lived as the bear market took over.

A bumpy and unsuccessful rocket ride

The “what goes up must come down” idiom perfectly sums up Safemoon’s fate in the last 2 years.  It had it rough during the crypto-winter, which resulted in heavy outflows. The rocket that many hoped to ride to the moon crashed hard. This crash was not only fueled by the bear market, but the rise of legal concerns.

Cracks in the Safemoon rocket emerged as sell pressure wiped out most of the liquidity that had previously gone into the Safemoon project. Also, there was an exploit that further eroded investor confidence. On top of that, many of the developers involved exited during its downfall, further eroding the moat of confidence that previously surrounded the project. An FBI investigation was the icing on the cake.

The final nail on the coffin may have been delivered by an investigation by popular YouTuber Coffezilla. He described the project as a billion dollar scam and offered some compelling evidence to back up his claim.

For perspective, SFM’s market cap fell from above $5 billion to as low as $2.66 million in December last year. However, it has since been making a gradual comeback with the market cap rising to $3.8 million. This suggests that there is some confidence flowing back into the project. In other words, there are people still investing in Safemoon, despite the events that took place in the last 2 years.

Is investing in Safemoon in May a smart move?

Many cryptocurrencies are starting to see renewed interest, especially after the steep discounts that they received during the crypto-winter. But now, the markets are recovering.

SFM has benefited slightly from renewed demand in the last 6 months. In fact, spikes in volume and weighted sentiment confirm that some investors still believe in the project.

Source: Santiment

But, how has the network been fairing? Development activity has been non-existent, except for a sudden spike at the start of April.

Despite this, the recent activity and slight price stimulated was not strong enough to warrant a surge in price volatility.

Source: Santiment

The slight market activity is evidence that there are attempts to revive the project. In fact, the official Safemoon Twitter handle claims that the network is still under development, but on-chain analysis seems to reveal a different outcome.

In summary, there are some people still investing in Safemoon. However, the project has been through a massive shakeup and many investors who got into it in 2021 ended up with huge losses. The barely existing development, coupled with tainted history, may not necessarily be confidence inspiring.

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Safemoon is another classic example of a project that flew too close to the sun and ended up getting burned. And not in the right way. Volumes driven by people investing in SFM have been low hence, the low investor confidence.

Only time can tell us if it can even make a comeback.