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- Feb 28, 2020
As you may already know, cryptocurrencies rise in popularity every day.
But there are plenty of people who aren’t familiar with all the elements and mechanics of cryptocurrency. This means they are susceptible to falling prey to scammers.
Find out the most common cryptocurrency scams and how to avoid these.
1. Fake ICOs & Ponzi Scheme
An initial coin offering (ICO) is a type of funding using cryptocurrency. The company creates coins to sell to investors in exchange for a specific amount of cryptocurrency. The investor can hold onto the coin and wait until the market climbs to sell it at a higher value.
ICO scams function in the same way by tempting investors with a newly-created coin. They entice investors with the ‘potential’ of the coin to become the next big thing and that they should hop on before the demand gets too big. The concept of ICO is to trade your coin for a higher price, but if the value is low for an indefinite amount of time and cannot be traded then there is virtually no profit to be made.
* Ponzi Scheme
The Ponzi scheme focuses on marketing strategies to bring more investors and money. When no new money enters the account and old investors no longer get paid, the scheme collapses. Eventually, the company’s services begin to dwindle, from an unresponsive customer representative to delayed withdrawals and technical issues until finally, the company disappears— and along with it, your money.
2. Shady Exchanges & Email Scams
These involve shady emails and giveaways that require you to click a link or provide personal information in order to claim your prize. No one wins anything from just clicking a link and if you’re already on the internet, then this should already be common sense.
Be wary of limited offers or free giveaways that give more value than your money’s worth. No one is giving away money, not on the streets and definitely not on the internet. So steer away from those ‘send “x” amount and receive x amount back’ or ‘get rich quick’ trading platforms.
3. Phishing Sites
This scheme begins with a suspicious email from a scammer posing as a legitimate individual or organization. The goal of the email is to make you click the link that will lead to a phishing site that has copied a real site. When you fill in the details of your account, the scammers collect personal data from you.
These sites are usually hard to identify because of its minor changes from the real URL or domain. So make sure when making financial transactions online that you are on the real domain by checking the URL. The URL should be secure and starts with a ‘https://’ not ‘http://.’ Also, be wary of Google Ads that clone exchanges but lead to phishing sites.
4. Fraudulent E-wallets or Applications
When it comes to picking an e-wallet, it might be better for you to pick the best-known and proven e-wallet services. However, better-known e-wallets will attract more imitators. Be wary of fake websites by always making sure you have the right URL. Imitation sites usually trick people with their domain and site appearance so that users log in with their account details.
Fake applications have also slipped into Google Play and App Store to fool investors into logging in with their real account and unknowingly providing confidential data. Take note of the slight changes between the real and fake sites. Check the grammar, spelling, or even just the color of the site.
Simple inconsistencies like these can make a big difference in identifying the real from the fake.
5. Pump & Dump Online Groups
The basic premise of the Pump and Dump scheme is to assemble a group of people to buy a product, service, or in this case a cryptocurrency. These people surround it with hype to encourage others to buy or invest and then the founders sell their holdings. The market drops and people lose their investments.
Pump and Dump groups usually use altcoins with a low market. The initiators charge a fee for anyone joining the group. Those who pay more and recruit more to the group get notified sooner of the coin name and the target price.
The price spikes when buyers are willing to pay more for the products; the prices pump and so does the demand for it. When the coin name drops, the first few who buy the coin at a high rate are the ones who profit the most. These early buyers get to sell their coins at a higher price due to the demand. However, the prices fall when latecomers resell their assets only to find a lack of buyers for their higher-priced coins. Prices will fall and the dump occurs that leads to a great loss for most participants.
6. Hackers & Malware
With a digital nature, no market is more affected by criminals than cryptocurrency. It’s a rule of thumb when it comes to the internet to never click an unknown email attachment, link or website. With just a simple press of a button, your money could be stolen and corrupted by dangerous downloads or programs unknowingly installed in your gadgets.
The road to accessing safe and secure cryptocurrency exchanges is certainly not by entertaining weird links or websites. When trading or dealing with crypto, exercise extreme caution when installing software, apps and extensions.
How To Avoid These Scams and Safely Trade Cryptocurrency
* Stop and Think
The proposal might be promising but don’t get carried away by the emotions that any salesperson wants you to feel. Remember that they are telling you these things not because they are necessarily true but because it’s their job to win you over.
Ask yourself questions about the company’s reputation. Who works behind the scenes? Are they transparent or anonymous about their team? Scammers value their anonymity so if you can’t find anyone from their team or employees, then you should be more wary. Most importantly, are they registered in any organization or country? All of these questions add to the legitimacy of the company.
* Do your own research
Don’t rely on the information they tell you, instead use that as a basis for your own research.
Do your homework and go through legitimate sites and then compare your research to whatever’s been said to you. A better alternative is that you seek out your own cryptocurrency or services rather than investing in the ones that come to you.
* Ask Questions
If the companies are legitimate, then most likely they would be willing to give you clear and complete answers. The enemy of scammers is knowledge and information. The sketchier and dodgier they are about their withdrawal process, risks, and fees, the more caution you should exert.
Don’t let a scam discourage you from engaging with the ever-evolving industry of cryptocurrency. It’s true that the market holds great potential but always level your expectations with real risks. When in doubt, keep in mind the most important rule of investing: don’t invest anything that you can’t afford to lose.
Please read also these posts:
Lesson 1: Get to know the coins
Lesson 2: Where to buy and keep cryptocurrencies
Lesson 3: A guide to stablecoins
Lesson 4: How to keep your crypto safe
Lesson 5: Different cryptocurrency wallets
Lesson 6: The best cryptocurrency exchanges
Lesson 7: How to earn and increase Bitcoins
Lesson 8: Debunking crypto myths
Trading cryptocurrencies carries a high level of risk, and may not be suitable for all investors. Before deciding to trade cryptocurrency you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose.