Distinguishing Between Shitcoins and Quality Coins: Investment Classification and Risk Awareness in Crypto Markets

In the cryptocurrency market, “Stray Dog” and “Golden Dog” are two concepts investors often mention. To understand the true meaning of “Golden Dog,” you must first understand what a “Stray Dog” is and the evolutionary relationship between the two.

The boundaries between stray dogs, golden dogs, and regular projects are not absolute; they can transform into each other. Well-operated stray dogs will eventually evolve into golden dogs (the most famous example being SHIB), while poorly managed golden dogs may ultimately lose their status as stray dogs. Essentially, regular projects are just more complex variants of stray or golden dogs.

Two Forms of Stray Dogs: Scams and Community-Driven

Stray dog projects are characterized by explosive growth in a short period. If investors enter at the right time, they may see returns of hundreds, thousands, or even tens of thousands of times. However, this premise relies on three key factors: whether the entry point is early enough, whether the price surge is supported by real value rather than paper gains, and whether the liquidity pool is sufficient to allow a full exit.

Stray dogs generally fall into two categories. The first is called “Pixiu” scam contracts—contracts that only allow entry but no exit. These exist both domestically and internationally, often operated by the same group of people who keep changing tactics. More advanced variants completely imitate a popular stray dog project, using the same name, Twitter, and official Telegram/Discord accounts, but swapping out the contract address. When the project is about to open trading, scammers will lead a large influx of funds, preventing participants from selling their tokens.

The second category is regular stray dogs, which are essentially community-led projects, often called meme coins. Community-driven projects are most likely to experience “godly” surges (rapid price increases) because the power of the community is often underestimated. Logically, this operation model is not inherently problematic, but it requires specific conditions: investors need patience to observe the project’s arrangements and follow its strategy; after entering, they should invite others to join, forming a community consensus.

YFI is an early example of a community-driven project. Many mistakenly believe its success stems from technical advantages, but the claimed technological edge is often insufficient to explain market performance. What truly drives the success of stray dog projects are several core mechanisms: the warehouse verification system, new user incentives, and staking airdrops and dividend systems.

The warehouse verification system requires community members to periodically verify large holders’ positions (top token holders). These large holders are added to dedicated groups, where they prove their holdings remain unchanged during irregular checks. As long as the top holders maintain or even increase their holdings, retail investors cannot trigger a sell-off wave. Without significant selling pressure, the price can skyrocket, further boosting holders’ confidence. If someone insists on selling, large holders will buy up the tokens they sell. This creates a seemingly “win-win” situation.

The new user incentive mechanism encourages investors to invite others via referral links, whitelists, etc. Staking and mining mechanisms require investors to lock in positions to receive airdrops, aiming to maintain token stability. Essentially, these three mechanisms reinforce a common goal: keep holdings steady, continuously add to positions, and delay selling.

The True Nature and Investment Value of Golden Dogs

Golden dogs are successful evolved stray dog projects. They are no longer purely community-driven, but in some ways, their investment logic is no more complicated than stray dogs—and can be even simpler. When people ask about the technical advantages, application prospects, or long-term visions of golden dogs, the answers are often disappointing—many have little to no real advantages in these areas. Some are already listed on exchanges, some have large funding rounds, but this often means limited upside potential and unlimited downside risk.

Typically, golden dog projects have transitioned from “explosive growth” to “maturity,” but this does not mean they have genuine technological support or application value. No matter how glamorous the story, their essence remains a financial game rather than true innovation.

Why Retail Investors Always End Up as Bagholders in Funding Rounds

Regular projects usually go through multiple funding rounds: angel, seed, private, and public. Each funding announcement emphasizes participation by well-known institutions, creating an illusion of “top-tier projects.” But a moment’s reflection reveals that these announcements are often carefully curated information released after multiple rounds of screening, primarily aimed at enticing retail investors to buy in.

Retail investors’ only value in these projects is as “cover”—targets for internal institutions to offload their holdings. Many dream of earning 10x, 100x, or more, but fail to realize that early investors in angel, seed, and private rounds have already made thousands of times their initial investment. Why are early investors willing to let retail investors earn dozens of times? The answer is obvious.

Regular projects tend to tell compelling stories—claiming to have advanced technology, plans for real-world applications, or to represent new market concepts. But are these claims truly important? Bitcoin’s technology is outdated, even slow for transfers, and has not undergone scaling upgrades, yet it remains the most important asset in the market. The relationship between real-world applications and token prices is often exaggerated—why assume that real-world use necessarily correlates with price?

From an investment perspective, just as no one cares about Feng Shui or whether a house has a history of unnatural deaths when flipping real estate, investors only care about the final exit price; stock investors are not supporting companies or helping bosses through tough times. The same logic applies to tokens—the real motivation is price differences, not the project’s technology or vision. Despite years of operation, projects like Cardano lack real-world applications, yet their market performance persists. As long as they don’t deliver on promises, narratives can continue—creating a perfect scam cycle.

For retail investors without channels or internal resources, participating in regular projects is almost worthless. Unless they follow the secondary market trends, most retail investors will eventually exit at a loss.

Reflecting on the Core of Investment Logic

Understanding the fundamental differences between stray dogs, golden dogs, and regular projects hinges on recognizing the distinction between “luck” and “underlying logic” in investing. Many see someone making 10x or 100x returns on a stray dog project and think that person is “awesome.” But once you understand these mechanisms, you realize they are just lucky.

In any stray dog project, there are people continuously operating and pushing the project forward. A good community results from collective effort, while successful outsiders are often those who contribute little or nothing but reap the rewards after the project succeeds—“ostriches.” Only those with enough luck avoid being “cut” during the process. But such luck is not the norm—myth stories in crypto are abundant but cannot be replicated long-term.

The real underlying logic is: if you cannot contact the project team, understand their development plans and vision; if you have no connections or insider information, and no access to exclusive resources, then large capital entering the project is essentially a trap. When you hold tokens but are not recognized by the project team, your holdings are transparent to operators—they will precisely calculate when to harvest.

Therefore, when investing in golden dogs, the most fundamental consideration should not be technical stories or visions, but whether you have informational advantages, community status, or internal connections. Without these, playing this game long-term is destined to be “arranged clearly.”