As we have entered a new era of cryptocurrency being the digital monetary mechanism, it doesn’t take long to understand the various risks involved with these digital transactions. We cannot just blame the instability or unpredictability of the crypto market. Still, these online scams are everywhere, and hence these exchanges and cryptocurrency platforms are no different.
Cryptocurrency has been a source of controversy since its start. It has fueled hundreds of rags-to-riches stories while still allowing con artists to make millions off innocent consumers and investors.
Experts suggest confirming whether the company or a platform you are choosing for cryptocurrency trading are blockchain-powered or not, meaning whether they track detailed transaction data.
Here are few common scams elaborated by Andy Klein, broker of The Investment Center, and how to avoid being a victim as you embark on the exciting cryptocurrency journey.
With the increasing trend of investors interested in trading cryptocurrency, the graph of phony / imposter websites has gone up. Many copy-cat websites are coming up every month with a genuine and similar outlook, having identical features at the front but with intentions to cheat at the back end.
While visiting any cryptocurrency platform, one thing to look for is how secure the web page itself is. So, in your browser, look for a small lock icon next to the URL and HTTPS at the start of the webpage address. The lock indicates security and how the data is encrypted between your device and the website. Thus, it cannot be interpreted in between by any hacker.
It is also recommended to type in a valid URL rather than click on suspicious links, even if they may seem reasonable. A minor change from O to zero may result in being redirected to a scam website.
One of the most common ways to detect a scam is to look for a fake ICO (initial coin offering). Scammers create marketing hype persuading people to purchase by offering lucrative pay-outs and exaggerated profits.
Fake ICOs can be eliminated by doing a systematic search. You can ask serious and demanding questions, test responsiveness and answers, review a long-term road map, and assess the team’s integrity.
Ponzi or a Pyramid Schemes
This is also one of the common scams in the cryptocurrency industry. For example, suppose a cryptocurrency platform encourages and persuades the investor to recruit new investors to maximize their profit. In that case, you need to stay away from these platforms. Because they point towards the possibility of a Ponzi scheme.
You can check the authenticity of the Ponzi scheme by following the simple advice by Andy Klein, ‘Does it offer consistent returns that are higher than the market’s average? It’s a Ponzi. Does it focus on recruiting new people, then any product? It’s a Pyramid Scheme.’
Pump and Dump Schemes
It’s not unusual for scammers to purchase a new altcoin in bulk. This temporarily raises the cryptocurrency’s share price and causes FOMO (fear of losing out) among other buyers. Then, scammers sell their shares of coins for a lower price as soon as new buyers start buying in the new coin and the prices rise. Of course, pumping and dumping are illegal in the securities industry. Still, they are far too prevalent in the grey area of cryptocurrencies.
Several tools are available online to monitor volume movements and increase in particular cryptocurrencies which helps identify such schemes.
Before and after their investment, new entrants don’t always understand the ins and outs of cryptocurrencies. As a result, many malicious systems have had the opportunity to swell. As a result, people face newer and more serious attacks from malware systems.
Modern malware intended to target cryptocurrency users and investors can hack a user’s online wallet balance. Then, they drain the account and replace the exact address with the scammer.
You should make sure you’re on a secure and trustworthy network that doesn’t compel you to download.exe files or ask you to open malicious attachments by updating the antivirus and system firewall.
Scams are nothing new in any industry, but cryptocurrency is especially vulnerable due to its decentralization and open-source nature. Therefore, trading and earning via cryptocurrency has its excitement; however, to keep this experience positive and fun, it is always recommended to perform thorough research before investing.