Cryptocurrencies like Bitcoins and Ethereum have revolutionized a new world of finance and investment opportunities. However, the rise of cryptocurrencies has also led to an increase in crypto-related scams and fraud schemes designed to separate investors from their money.
Managing cryptocurrency is not as easy as managing money in the bank. Scammers can trick you with ease and steal your assets.
Cybercriminals have been busy creating new strategies to trick Bitcoin users and investors as the technology becomes more widely recognized. Fortunately, you may prevent yourself from being a victim by being aware of these risks.
This article will show how you can protect yourself from cryptocurrency scams.
Understanding Cryptocurrency Scam
Cryptocurrency is a digital currency and usually has no central issuing or regulating authority. Cryptocurrency scam happens when scammers or fraudsters use false identities to trick their victims and steal money. This scam also includes the theft of bank information and personal details.
The financial landscape is changing as a result of decentralized technologies. Regulators are always changing, the business is very complex, and the fast pace of innovation makes it easy for scammers to commit digital asset theft.
Common Types of Crypto Scams
Fake ICOs
An initial coin offering (ICO) that is fraudulent has all the characteristics of a real one, but it lacks the infrastructure and technology that supports it. Put another way, it’s like launching a coin that merely has a name and doesn’t have any existence.
A legitimate initial coin offering (ICO) aims to introduce a new cryptocurrency to the market for the first time, with the hope that its creators will utilize the money raised to maintain the cryptocurrency network. An impostor initial coin offering (ICO) concludes with the developers disappearing along with the funds, exposing the entire scheme as a fraud.
Crypto Ponzi Scheme
These are investment schemes in which profits from legitimate business operations are traded for the money of new investors in order to pay returns to existing investors. These schemes eventually fail when fresh investments become less frequent.
Phishing Scheme
A phishing scam occurs when someone acts like someone else, often a company in order to gain your consent to share your personal information. Many cryptocurrency phishing schemes try to trick you into disclosing your private crypto wallet keys by posing as legitimate emails and requesting that you log into your account.
Investment Scam
In this scam, an investment manager will reach out to you, whom you have never heard of with some incredible opportunities. First, they’ll ask you to send crypto to their online account and give you a period that you need to do it in a hurry to earn an ample amount of money.
These fraudsters tend to have authentic-looking websites that make use of professional investing terminologies to appear authentic. However, if you sign into your platform account, you will not be allowed to withdraw money or you might only be allowed to do so after paying an enormous fee.
Pump and Dump Scheme
In this scheme, scammers usually spread false or misleading information to create a buzz among others into investing in a particular coin claiming that they have inside information and that some development will lead to a hike in the share’s price.
The culprits sell their shares as soon as buyers enter the market, sharply lowering the price. Then, new investors lose their funds.
Rug Pulls
A rug pull is a scam where a cryptocurrency or NFT developer increases the value of the project to entice information, only to abruptly stop the operation or vanish stealing all funds of investors in the process.
Fake Wallets
Scammers create fake wallet apps that appear to be legitimate but are designed in such a way that they take away your cryptocurrencies once users transfer their funds to these wallets.
Ways to protect yourself from cryptocurrency scams
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Conduct in-depth Research
Conduct extensive research when you’re investing in any cryptocurrency including its authenticity and past records. Always look for independent reviews and expert opinions to make a rational and infrared decision.
In-depth research helps to create awareness regarding scams existing in the market and save you from falling into the trap of scammers.
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Be Alert to Unrealistic Promises
If an investment opportunity sounds too good to be true so be a little skeptical about it. Real cryptocurrency assets never promise quick profit and guaranteed return
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Verify Team Members
Always double-check the credentials of the team member listed on the website. Inquire about their prior work and employment on LinkedIn accounts. Be careful if you can’t verify their identities and their profiles lack detail.
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Use Reputable Exchanges and Wallets
Select trustworthy, well-known cryptocurrency wallets and exchanges that have a track record of safe operations. In addition to keeping security measures like two-factor authentication and withdrawal-address whitelisting (which identifies addresses in your contacts list as authorized receivers of cryptocurrency withdrawals) enabled at all times, look for any past instances of security breaches.
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Diversify Your Portfolio
Don’t rely on one single venture for investment, create a diverse portfolio to reduce the risk associated with any one investment failing.
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Stay Updated
Keep yourself updated with the latest news and trends occurring in the world of cryptocurrency. If you’re thinking of investing or already invested join online forums, follow industry experts on social media, and keep up with new dangers and best practices by subscribing to reliable newsletters.
There is a concerning trend that puts at risk public confidence in digital assets: the increase in bitcoin scams. However, you can safely protect your money and navigate the cryptocurrency world by remaining cautious, doing extensive research, and following to best practices. Recognize that information is power and that the best protection against fraud and scams happens to be informed.