Having facilitated some monumental scams over the past nine years, Crypto currencies have also revolutionized the way the world looks at transactions.
While the smartest minds have created some game-changing companies backed by the power of Block chain and crypto currencies, nefarious minds have also jumped on the bandwagon, fleecing unwitting investors in elaborate crypto currency scams.
Being caught out is going to hit you hard, as with any scam. We don’t want that. Below are five common scams to watch out for before you get involved with crypto currencies.
Creating marketing hype and persuading people to buy – the most common way to pull off a digital currency
Also Read: 20 Interesting Facts and Secrets About Bitcoin
The breeding ground for these fraudulent ICOs is Ethereum, but Ethereum is not directly responsible for it as it is an open-source project entirely. Dreaming of 100x gains in a matter of weeks by just holding worthless ICO tokens, it is the ignorance of newbie investors.
Usual signs of fraud ICOs or Token Sales:
- Copied whitepaper
- Half team anonymous
- Unusual hurry in execution
- Mismatch of written & said words
- Ignoring hard questions
- No strong reasons for the token economy
- No roadmap
A ‘shady exchange’ is the second most common form of crypto currency scam. These are the exchanges that started bragging and sprang up over-night. Once you trust them and deposit your coins there, you have no way to get it back if the intentions of that exchange are not right – so one needs to be extremely careful here.
Since they fail to scale and innovate to stay relevant in the market, some exchanges that start well can run away with your money any time.
Many fake android wallets have also been launched on play store with the launch of Bitcoin.
Since there are chances that you may get stuck in a digital currency scam and end up losing your money – it is a big NO from us to pick any wallet randomly from the play store. Never fall for them without proper due-diligence though these wallets may promise you the seed and control of your funds.
It happens many times during the launch of Bitcoin forks and is one of the easiest ways to scam people. By ripping you off your BTC too, these wallets take your seed or private keys.
Pyramid or Ponzi Schemes
People still fall for it even when this form of digital currency scam is easiest to spot. A ponzi scheme is when you find a crypto project that actively encourages the recruitment of new investors to maximize your profits. It works on the model of scamming the one who enters the system at a later stage. Ponzi schemes are schemes that promise absurd returns.
A renowned Bitcoin speaker, and proponent, Andreas M. Antonopoulos can help you here with his advice. To avoid such schemes or projects, you can quickly do a litmus test here.
Somehow by fooling you, here, the scammers will try to get your username, password, or seed keys. Mostly the attackers use two methods to achieve this:
- Fake Airdrops
Pump & Dump Groups
These are not something new in the traditional market and are one of the most common types of crypto currency scams. You will find many crypto groups with 40,000-100,000 members in it, if you search on Telegram.
In these groups, they don’t chit-chat. The truth is – these groups are the tools to manipulate the prices of altcoins that have low market caps.
In just a matter of minutes, people who act fast get the advantage and the people who are a bit late suffer from the plummeting prices. To monitor the volume increase in a particular crypto which helps in identifying such schemes – there are several tools available in the market.
This is the most sophisticated form of digital currency scam. Scammers make fake Twitter and Facebook account to impersonate the actual legit project or the person behind it in this type of crypto scam. Announcing airdrops etc. which are never true, you will find many impersonators on Twitter acting like Vatalik Buterin or Binance’s CEO.
To scam people of their crypto funds, scammers have started acting as crypto exchange support staff.
It is imperative to know that any burgeoning technology will attract unscrupulous individuals. This is especially true if said technology can lead to extremely high returns.
Research is the key to staying safe in crypto currency. Unfortunate individuals take the plunge and will fall victim to fraud here all the time. Do note – things that seem too good to be true probably are. By knowing what they are doing, some crypto currency day traders do make vast amounts of money. Most of them have experience of trading, buying, and selling Bitcoin and other altcoins since the very early days.
Start small, and only invest what you can afford to lose in this market. It is important to consider these risks of investing crypto currency so you know what you’re getting yourself into!