Most new crypto investors struggle to identify fraudulent projects. CoinGecko has published a list of red flags to watch for when analyzing a token. Experts outline how to examine token distribution, assess liquidity pools, and detect anomalies using visual tools.
Check Token Holder Distribution
According to the guide, the first thing to evaluate is the token's holder data. If the top 10 wallets control more than 50% of the total supply, it’s a cautionary signal. The risk increases if large amounts are held in personal wallets rather than centralized exchanges (CEX), decentralized platforms (DEX), or liquidity pools. A declining number of holders is also a red flag, pointing to falling interest in the token.
How to Spot a Scam
CoinGecko analysts warn about common scam tactics:
- Honeypot – a setup where the token can be bought but not sold.
- Buy/Sell Tax – hidden fees during buying or selling that erode profits.
- Developer History – past involvement in scam projects increases risk.
Experts suggest using the GT Score as an initial filter, but not relying on it alone. Always conduct your own due diligence before investing.
Analyze Liquidity and Token Age
The depth of a token’s liquidity pool indicates how stable its trading is. The larger the pool, the less chance of price manipulation. Locked liquidity reduces the risk of a sudden price crash, as funds can’t be withdrawn easily.
Token age is another key factor. Most scams occur in the early days of a project’s launch. The newer the token, the higher the likelihood it may vanish.
Use Bubblemaps for Visual Analysis
Bubblemaps is a service that visualizes how tokens are distributed and how wallets are interconnected. It helps detect centralization and suspicious clusters. Users can access Bubblemaps via GeckoTerminal by opening the Bubblemaps tab on any token’s page.
Healthy distribution indicators:
- Tokens are spread across many independent wallets.
- No obvious clusters or large whales.
- Distribution appears organic and random.
Warning signs to look for:
- Large bubbles may signal excessive control by a few holders.
- Linked address clusters could indicate coordinated behavior.
- Uneven distribution raises the risk of manipulation.
CoinGecko encourages users to share these principles with others, especially those involved in early-stage launches and high-risk trades.
This post is for informational purposes only and is not an ad or investment advice. Please do your own research making any decisions.
