In 2021, cryptocurrency scammers stole a record $14 billion.
So, you’re right to be worried about investing in cryptocurrency. You know investing in cryptos is the modern way to generate wealth, but you’re afraid. You fear becoming one of the victims of these cryptocurrency scammers.
So, how can you manage this risk and leverage crypto investment to build wealth?
Keep reading to learn how to spot and prevent bitcoin scams.
Understand Common Types of Bitcoin Scams
You need to learn the most common cryptocurrency scams to minimize the risk of becoming a victim. The idea is to find out how each of these crypto scams works to make it easy to spot them.
Here are the top crypto scams.
Bitcoin Investment Schemes
Cryptocurrency scammers often masquerade as seasoned crypto investment managers to mislead their victims. They claim they know all the secrets and tricks for making a killing in the crypto market. All you need is to pay an upfront fee, and they’ll guide you on how to start making millions through cryptocurrency investment.
Unfortunately, once you make this payment, these crypto scammers go dark.
Some of these scammers may ask you to provide your personal identification information. They’ll claim they need these details to set up a crypto trading account on your behalf. However, this is a scam in which they’ll use your personal details to commit fraud.
Cryptocurrency Pyramid Schemes
Has a friend or relative invited you to join a “once in a lifetime” cryptocurrency investment opportunity? They claim that all you need to join is to make an initial deposit and then recruit two more people to start earning. If you have been presented with such an opportunity, there’s a high chance this is a crypto pyramid scheme.
The scheme works by using the new investors’ funds to pay the older ones. So, for the pyramid to survive, it must keep bringing in new investors. Unfortunately, it becomes extremely hard to recruit new investors with time, and when this happens, the pyramid collapses.
To avoid falling for this crypto scam, watch out for these signs of a bitcoin pyramid scheme:
- A promise of unrealistic returns
• Emphasis on recruiting new investors to start earning
• Investors/recruiters boast of extravagant returns
• Difficulties cashing out earning
• A complex returns calculation structure
• Extreme pressure to invest immediately
If you notice any of these signs, you should hold off investing until you undertake enough due diligence.
Bitcoin Mining Scam
Bitcoin scammers will present themselves as a bitcoin mining company planning to expand its operation. This company will be looking for a limited number of people to come in as investors. The idea is to pull funds together to invest in powerful bitcoin mining equipment.
The fake bitcoin mining company will even have a website with many testimonials from happy investors. These investors will claim how this company has changed their lives and encourage you to join. Sadly, these things are ploys meant to trick you into making a deposit.
The fake mining company’s website will soon go offline when enough people start pushing for their returns. The company will rebrand and come back with a different name to steal again from unsuspecting individuals.
Fake Cryptocurrency Exchanges
The other common bitcoin scam involves the use of fake cryptocurrency exchanges. Scammers will set up a website that looks like a real cryptocurrency exchange platform. They’ll advertise this fake exchange massively by offering ludicrous promotions such as free bitcoin when you sign up.
The objective is to lure in investors to set up accounts on this crypto exchange platform and deposit funds.
Unfortunately, most people don’t realize these crypto exchanges are fake until they try cashing out. They start receiving errors and experiencing difficulties accessing their crypto wallets and trading accounts. These exchanges usually shut down when a high number of people start raising complaints.
Stick with well-known crypto exchanges to avoid this bitcoin scam. Look for a company with a wide network of Bitcoin ATMs, such as Byte Federal. The idea is to avoid the risk of buying and selling Bitcoins online by using these ATMs.
Contact here to know more about how these Bitcoin ATMs work. Your goal is to get a detailed guideline on how to invest in bitcoin.
Pump-and-Dump Cryptocurrency Scam
One of the biggest risks of investing in cryptocurrencies is their susceptibility to pump and dump scams. Although worldwide governments are trying to develop crypto trading regulations, they’re yet to fully regulate this field. So, scammers can easily launch a new crypto coin and hype it to increase its price rapidly.
These scammers will make false and misleading recommendations about this coin to increase its demand (pump). The goal is to make more people buy this coin, increasing its price rapidly. These scammers already own this coin and will sell it once it reaches a certain high price point (dump).
Sadly, shortly after they dump this crypto coin, its price will plummet, and new investors will suffer massive losses.
Always conduct your own research before buying new crypto coins to avoid falling for this scam. Read the coins’ whitepapers to know their blockchain technology and the teams behind the technology. Your goal is to know the specific things that give these coins value.
Social Media Cryptocurrency Giveaway Scams
Today, there are countless social media contests offerings lucrative cryptocurrency prizes. Unfortunately, most of these contests are bogus, and their target is to steal from you. Once you click on these contests, they’ll give you a simple game/quiz that you’ll obviously win.
After winning, you’ll be redirected to a website where you’ll be required to input your personal identification to receive the crypto prize. Also, you might be requested to make a “small” crypto transfer fee. All these ploys aim to access your crypto wallet information to steal your Bitcoins.
Also, these scams aim to steal money from you by asking you to pay upfront fees. Always undertake enough due diligence before participating in a social media cryptocurrency contest. Also, be wary of any contests that ask you to pay fees to participate or receive your cash prize.
Finally, don’t share your personal identification or crypto wallet information with strangers on social media.
Measures to Prevent Falling for Bitcoin Scams
You must be proactive to minimize the risk of becoming a victim of any of the above cryptocurrency scams. The idea is to take action to protect your crypto wallet and your money.
Here are key measures to prevent falling for bitcoin scams.
Always Do Your Research
One of the worst cryptocurrency investing mistakes many people make is following the masses. They choose a cryptocurrency exchange platform because someone from Facebook recommends it. They buy and sell crypto coins depending on what people are saying online.
Unfortunately, skipping research makes you vulnerable to cryptocurrency scams. You’re likely to follow the advice of scammers who’ll mislead you into choosing a fake crypto exchange. Also, these scammers may sell you on buying overvalued coins with a high risk of plummeting.
You need to always undertake your own cryptocurrency investing research to avoid becoming a victim of these scams. The great news is that there are countless genuine resources online on investing in bitcoin safely. These resources will help you find real cryptocurrency exchanges.
Never Share Your “Private Keys”
Scammers have a way of gaining your trust and making you reveal sensitive information. That’s why you should always pause before sending out cryptocurrency wallet information to a stranger. Ask yourself why this person needs this information.
Also, know there are pieces of personal identification information you should never share with anyone. Never share your cryptocurrency wallet’s password and private keys.
Trust Your Instincts
In many instances, your instincts will warn you when a crypto investing deal sounds too good to be true. So, don’t ignore them. Understand that anyone offering guaranteed crypto investing returns is a liar.
Like all other forms of investment, cryptocurrency carries risks, and nothing is guaranteed. It’s up to you to take calculated risks to maximize your crypto investing profits.
Learn to Spot Bitcoin Scams!
Without adequate regulation, the cryptocurrency market is the latest goldmine for scammers. So, as a beginner, it’s logical to let the fear of getting scammed prevent you from investing in Bitcoin. Rely on the above tips to learn to spot Bitcoin scams.
Also, always do adequate research before investing in cryptocurrencies.
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