The world of cryptocurrency investments is a new industry that has exploded into popularity over the last decade or so. Because the cryptocurrency industry is so new, most of the investments, in most countries, remain relatively unregulated, making it potentially risky to invest money into a specific type of online token or coin. Many financial scammers see this brief window of the unregulated industry as an opportunity to take advantage of new investors and those who don’t know too much about the market.
Scamming, however, is not something new, and it is certainly not exclusive to cryptocurrency investing – scammers have been around for ages, and whether it be through the selling of some cheap product or trick, you simply have to wise up to avoid crypto scams.
There are a few things you can do to keep your digital investments safe. You need to be able to detect and spot a crypto scam from a mile away, and you also need to know how to avoid the scammer should they proposition you. Lastly, you need to know how, and to whom you should report a crypto scam in order to make the marketplace safer for everyone else as well.
Use this crypto guide to stay safe and to keep your crypto coins from getting compromised.
Crypto scams are exactly what they sound like – they are the same as any other financial scam. Except in this case, those who are scamming use digital currencies as a way to get potential investors to pay them money. Most of the time these coins are shoddily engineered and have no value, and the scammers create them to pump money out of investors, dump the coin, and then vanish into the thin air with a boatload of new money.
In countries where the crypto market is still being studied in order to create robust regulations, it is difficult to find and prosecute these online villains.
Pump-and-dump Bitcoin scams are by far the most common, and this tactic is surely not only happening in the world of digital currencies. In fact, pumping and dumping have been around for years and years but are easier to do in the crypto world as coin owners can stay completely online and anonymous. Of course, as the legalities around cryptocurrencies start to improve, and regulations start to be enacted into law, these types of scams will be much harder to pull off.
Generally, cryptocurrency scams fall into one of two categories:
Until then, it is up to the investors and cryptocurrency purchasers to make the right decisions when it comes to deciding which coin to invest in. For newbies, it might be difficult to detect a scam coin, while for cryptocurrency veterans, scam coins can be seen from a mile away.
Let’s look at a few tactics to detect a cryptocurrency scam.
As mentioned above, many crypto scammers follow the same playbook when it comes to coercing money from investors. There are certain tactics that they employ, along with certain lines that they might use when advertising their coin. By reading the crypto guide below, you will be able to identify scam coins and avoid investing tons of money into what may look like a “promising project”. Yet is the complete opposite.
One of the biggest problems that exist today in the cryptocurrency market is the fact that many platforms allow coin creators to put up their projects without much pushback. These creators are then free to advertise and market their coin as the next best thing, or the next Bitcoin all over various social media platforms to millions of potential investors, young and old, that might not know any better.
Many investors may get trapped by a good marketing campaign that is advertising a coin that has no future and might be created for completely fraudulent means. Without any regulation surrounding the creation of these investment opportunities yet, it remains up to the buyers and investors to do their homework on the coin that they’re potentially going to invest in.
This means that all investors must read the white paper of the coin. All cryptocurrencies go through a developmental stage whereby the engineers are obliged to upload a public document known as the white paper. This document outlines the formulas and protocols used to create the coin, as well as the blockchain network on which the coin will operate. Reading this document and reading between the lines is a great way to know if the coin has any future as a successful digital venture, or whether it was shoddily created for a pump-and-dump scheme.
If you don’t know a lot about cryptocurrency investments or the blockchain, speak to professionals on various websites that will help you know if the altcoin you want to invest in is safe and scam free.
When entering into the cryptocurrency industry one must understand that there are established teams of engineers and entrepreneurs that are known to create successful ventures, and who act with integrity and honesty when embarking on the creation of a new coin. Reputation in this industry means a lot, as having good standing with the investment pool will allow you to embark on projects that will receive public backing and investment.
Conversely, there are also teams of entrepreneurs and engineers who have become known to be untrustworthy, and always looking to make a quick buck – whether with a Bitcoin scam or any other tactic. There are teams who look at the crypto market as a get-rich-quick scheme and are in it to make personal profit in the fastest manner possible. These people are not interested in furthering the marketplace as a whole and developing the industry into a truly decentralized platform for full financial freedom in the future.
As an investor in any new project, you need to be well informed about the people that you are investing in, alongside the project that you intend to back. In fact, the people are the project, and you need to do your research on the team behind the coin and go into their history before investing. If you find a string of failed projects, bad public opinion, and even straight-up scams, then you should know to avoid their projects by all means.
Throughout this crypto guide, we’ve mentioned the marketing side of any cryptocurrency or digital asset quite often. This is because as much as a good project can speak for itself, in the modern online world social media provides a fantastic opportunity to market a product to millions and millions of potential investors. The way that scammers market has a few hallmarks and similarities that might help you identify a scam before anyone else.
If there’s one thing that you need to remember, it is that cryptocurrencies are generally not a money-making endeavour. All you need to do is look at the biggest coins on the market – Bitcoin, Ethereum, XRP – these coins are all sold for a much larger purpose than simply making a quick buck – the support of a bigger engineering feat that actually plays a much bigger role in the world. Of course, as they have grown more popular, many people are using investments as a money-making scheme, but you’ll never hear the actual creators and engineers market their products as a way to make money.
Scammers, on the other hand, often create an entire project simply to get a boatload of investment money, only to dump it in the future. As such, they will market their crypto coin as the next big thing without actually ever advertising the engineering or greater purpose behind the project at all. This is because there is no actual belief in the future of the project as a whole. Instead, the intention is to up investment. Be on the lookout for coins with cheap marketing tactics.
One of the most common advertising techniques used by scammers is the marketing of “free items”. Oftentimes a scam coin will advertise the drop of a free coin into your digital wallet should you invest. This is a cheap tactic that aims to get people interested and is often never actually provided once an investment, no matter how small, is made. If you see a “free item” advertised by any cryptocurrency project, be weary, or simply stay clear from the get-go.
Now you know how to detect crypto scams, the research that you need to do on any coin before making an investment, and how to tell a scam team apart from a real cryptocurrency team that believes in their project. Next up, we’re going to go through a few guidelines that you should abide by in order to avoid these scams completely.
There’s no need to waste your time with research into potential scam coins if you’re already employing tactics to avoid them outright:
The unfortunate truth about the cryptocurrency industry is that many scammers and get-rich-quick projects do exist in the current marketplace. Of course, that won’t always be the case as more legalities and regulations start to be enacted in order to protect online investors. We’re maybe 5-10 years out from a completely safe and regulated marketplace when it comes to cryptocurrency.
Until then, it is up to you to stay safe with regard to your digital assets and investment money. It isn’t difficult to stay safe as a lot of these crypto scams look exactly the same. You simply need to be aware and do your research so that you can keep yourself safe in the marketplace. By reading this crypto guide you will have figured out how to spot and how to avoid cryptocurrency scam artists. Share this knowledge with other traders whenever you can. After all, knowledge is power.
