Looking to cash in on the next big thing? Would you like to make 300% in return on investments (ROI) within the next year? All you have to do is give me some of your Bitcoin and I will make sure you make a lot of money. Sounds good, doesn’t it?
If it sounds too good to be true then it probably is.
The cryptocurrency market is decentralized and unregulated which makes it a prime breeding ground for scammers. It is estimated that $9 million a day is lost in cryptocurrency scams. Bitcoin itself is very difficult to hack, and that is largely due to the blockchain technology supporting it. As blockchain is constantly being reviewed by bitcoin users, hacks are unlikely. Fraud, exit scams, and plain old theft is another matter. Scammers leave people broke and broken down after realizing there is no way of getting their funds back. Here are only a few of many scams all crypto-enthusiasts should be aware of and what to look for to keep from getting taken.
This covers a wide variety of scams but social media seems to be the hot spot at the moment. Facebook and Twitter have been in an uphill battle the last few years with scammers posing as popular or famous people promising rewards for sending a certain amount of funds to them. Send me “x” amount and I will in return send you “x plus” back. The accounts look legit at first sight, so they lure in a few that are interested. The scammer may only get a dozen or so replies. This can add up to hundreds of dollars stolen every time it is used and the scammer can do this as often as they want. The best thing to do is to stay away from these completely because every one of these is a scam.
An exit scam happens when cryptocurrency promoters run off with the investor money after or during the initial coin offering (ICO). It can also occur when an exchange just up and disappears, ultimately taking any of the cryptocurrencies stored on the platform with them – never to be seen again. To keep from falling victim to this type of scam, take time to read their white paper. If it is poorly written, the company is probably poorly run. Look out for over the top projections. High-profit projections with no data is a big warning sign. See who is on their team and what details are listed. Investigate the subjects to see if they are known to be associated with other Ponzi schemes. Finally, make sure they have an actual product – which most do not.
Theft can occur in many ways. One of the most common is the theft of one’s private keys. This can happen when you alow a trading company, exchange, or a mining pool to hold and manage your funds in their online wallets. Once they have enough people signed up and invested, they simply shut down and disappear. To avoid this situation, never allow a third party to have or control your assets – keep them in your own wallet or reputable exchange account and connect via API to use crypto-related services. It is up to you alone to manage your funds. If you feel a trading site is for you, there are some legit ones out there that let their members have complete and private control of their wallets and funds.
These are just a few of many types of scams that lure in new and uneducated traders and investors. Take your time and do your homework to learn what to look for when investing to avoid getting ripped off.