Scammers constantly seek innovative methods to steal money, and the recent explosive rise of cryptocurrencies has provided several chances for deception. Knowing the hazards is crucial if you’re interested in crypto. This text will walk you through typical scams and how to recognize and prevent them.
Types of Crypto Scams
Here are some of the most common crypto scams to watch out for.
Scammers may create fake cryptocurrency trading websites or knockoffs of authentic cryptocurrency wallets to trick their victims. Often, these fake websites use domain names that are quite similar to the genuine ones they are designed to emulate. Given their similarity to legitimate websites, it can be challenging to tell them apart. When a website is a phony cryptocurrency, one of two things occurs:
- As phishing pages: The information you provide, including your crypto wallet password, recovery phrase, and other financial details, is obtained by fraudsters.
- As straightforward theft: You might be able to withdraw a small sum of money at first through the website. You may increase your investments since your current ones seem to be doing well. However, the site either fades away or stops processing further withdrawals.
Cryptocurrency phishing techniques frequently target online wallet data. Scammers target private keys for crypto wallets, which are required to access the wallet’s funds. Their operating system is similar to prior phishing attempts and is linked to the fake websites stated above. To draw visitors to a specifically created website, they send emails asking for sensitive personal info from consumers. Once the hackers get this information, they steal the bitcoin stored in those wallets.
Pump and Dump Schemes
This concerns a specific coin or token pushed by scammers using an email blast or social media like Twitter, Facebook, or Telegram. Traders hurry to purchase the coins because they don’t want to miss out, raising the price. After inflating the price, the con artists sell their assets, which leads to a crash as the asset’s value rapidly drops. This can occur in a matter of minutes.
Fake Celebrity Endorsements
To entice prospective targets, cryptocurrency fraudsters may adopt celebrity, corporate, or influencer personas or make claims about endorsements from these individuals. This occasionally entails fake marketing cryptocurrency to unsophisticated investors. These frauds can be extremely well-crafted, including flashy websites and booklets with celebrity endorsements from well-known figures like Elon Musk.
Cloud Mining Scams
The term “cloud mining” describes companies that rent out mining equipment for a predetermined fee and a share of the income you are reportedly going to make. Theoretically, anyone could join mining without spending money on pricey equipment thanks to cloud mining services. But how do you understand that a mining company is not a scam or, at best, ineffective, wasting your money or delivering subpar results?
How to Spot Crypto Scams
Promises of Guaranteed Returns: No financial investment can guarantee future profits since investments might go up and down in value. Any cryptocurrency offering that makes money-making claims should raise warning flags.
A Weak or Nonexistent Whitepaper: A whitepaper is the most critical component of the crypto project. Thus every cryptocurrency should have one. The cryptocurrency’s architecture and operation should be covered in the whitepaper. Be cautious if the whitepaper doesn’t make sense or, worse, doesn’t exist.
Excessive Marketing: Every company advertises itself. However, cryptocurrency scammers draw in customers by spending heavily on marketing, including internet advertising, paid influencers, offline promotion, etc. This is intended to reach as many people as possible in the quickest amount of time and to generate money quickly. Consider stopping and further studying if you think a crypto offering’s marketing is pushy or makes grandiose claims without evidence.
Unidentified Team Members: It should be feasible to identify the primary individuals behind the majority of investment companies. This often entails easy-to-find bios of the investment’s managers and an active social media presence. If you can’t determine who is operating a cryptocurrency, use caution. Read more about Cryptocurrency volatility: What is it all about?
Free money: Most investment opportunities that claims to offer free money, whether in fiat currency or cryptocurrency, is probably a scam. Still, giveaways and airdrops are often launched for marketing purposes. If the are launched by reliable companies, it could be less considered to be a scam. It is always important to read the rules of such events and what users should do for a reward.
How to Protect Yourself from Crypto Scams
Take the following actions to safeguard yourself from common cryptocurrency scams:
Protect your wallet: Keep a private key to your wallet secured and don’t share it with anybody. If a company solicits your keys in exchange for an investment opportunity, it’s probably a fraud.
Keep an eye on your wallet app: When sending money for the first time, send a small amount to verify the app’s validity. Stop the update when upgrading your wallet app if you see any suspicious activity, and remove the program.
Invest in assets you are familiar with: Before determining whether to invest in a cryptocurrency, it is preferable to take a break and conduct a further study if its operation is unclear. You may be interested in trading popular assets, like Bitcoin, Ethereum, Dogecoin, or Shiba Inu. Also, always purchase on trusted websites which have their own app, like cex.io wallet desktop app.
Take your time: Scammers sometimes employ high-pressure techniques to get you to spend your money immediately, such as by making incentives or discounts if you do so directly. Before making any investments, take your time and do your homework.
Be wary of social media ads: Social media advertising should be avoided since crypto scammers regularly use them for marketing their nefarious schemes. To appear credible or to offer promises of freebies or free money, they may utilize unauthorized images of famous people or successful business people. Maintain a healthy dose of skepticism when bitcoin possibilities are promoted on social media, and do your research.
Avoid cold calls: It’s a fraud if someone reaches you unexpectedly to pitch you a cryptocurrency investment opportunity. Never provide anyone who contacts you this way with your personal information or money.
Only download programs from legitimate stores: Although phony apps may appear in the Google and Apple App Stores, these are the only places you should ever download apps.
Do your own research: The most widely used cryptocurrencies are not con artists. However, research it if you’ve never heard of a particular cryptocurrency. Check to see if there’s a whitepaper you can read, learn who controls it and how it functions, and check for honest reviews and endorsements. To check for fraud, get an accurate and reliable list of bogus cryptocurrencies.
Is it too good to be true: Businesses that guarantee returns or claim to make you wealthy overnight are probably frauds. Be cautious if anything sounds too fantastic to be true.
Last but not least, never use the money you can’t afford to lose on an investing opportunity. Understanding the risks is crucial since cryptocurrency is speculative and volatile even if you aren’t being scammed.