Memecoins
Analysts warn investors about Davido meme coin
Financial analysts have expressed concern over Davido’s newly launched meme coin and warned of the associated risks.
The introduction of the currency into the market sparked a debate in financial circles.
Experts have highlighted similarities to historical Ponzi schemes, such as MMM, in which millions of investors lost large sums of money.
Analysts argue that such coins often capitalize on the popularity of individuals without strong underlying fundamentals or a clear business model.
A financial analyst, Vincent Nwani, said that if such a currency was allowed to thrive, it would have an adverse effect on the Nigerian financial system.
He said: “To begin with, I am a huge fan of Davido, his music and his family, and will continue to enjoy his extraordinary contributions to the Nigerian entertainment industry. Nonetheless, the recently launched Davido coin is a bit of a stretch for me due to its similarity to the various Ponzi schemes we have struggled with in this economy.
He noted that Davido’s celebrity status and fan base were the main drivers of the coin’s value proposition.
“I say this for many reasons. First, the operation of the coin appears to be designed based on Davido’s popularity, which he follows with the firm belief that the platform can successfully leverage his brand. If such a currency is allowed to thrive, what this will do is that other popular personalities in Nigeria will quickly follow suit, and serious cases of abuse will become inevitable. Without a doubt, this reality has negative implications for the Nigerian financial system.
“The MMM experience remains so fresh in our minds. Three million Nigerians have lost an estimated $18 billion to MMM, and this must not be allowed to happen again.”
The Security Exchange Commission said the meme coin has not gained regulatory approval and warned capital market players not to associate with it.
Another financial analyst, Ambrose Omorodion, advised anyone without financial knowledge to avoid investing in cryptocurrencies, adding that the SEC would not take the company to court if investors suffered losses.
“In the financial market we need more products to enter. However, meme coins are highly risky and I believe that is why the SEC has stepped in to warn people that they are risky.
“Also, since cryptocurrency has emerged in the global space, I see that people are venturing into it, but my advice is that if they don’t have the financial knowledge, they should not enter or invest in it at all. The SEC will not sue the company if investors become victims,” he explained.