Given the post-modern setup of our financial landscape today, cryptocurrency can be seen as a valuable asset to more than just potential traders.
The viable nature of digital currencies makes it all the more convenient for investors and traders alike to participate in. It is liquid, highly portable, and offers seamless transactions from both ends. Once you become more involved in these new monetary mechanisms, the risks imposed from such a bargain is sure to come to you sooner rather than later.
This isn’t speaking of the volatile nature of the market, either. Dabbling in the crypto trade, you’ll find the many innovative ways scammers will try getting hold of your pot of gold. When you’re just starting in the trade, experts recommend you confirm whether your chosen cryptocurrency of choice is blockchain-powered, meaning they track detailed transaction data for full transparency.
Because of the majority of cryptocurrency’s decentralized nature that allows you to be in full control of your investments, it also makes it harder to delineate a proper regulatory and law enforcement framework. If scammers manage to trick you into making mistakes while using their coin, they may end up stealing it, and there is virtually nothing you can do to recover your stolen money.
There is then a crucial need to understand the ins and outs of potential schemes they might trick you into participating, so you can safeguard yourself and your assets before falling down the rabbit hole of scammers. Being able to identify these red flags early on can help you build a more enduring, sustainable trading ethic when it comes to online money.
As you consider investing in different startups and exchange platforms, be aware of these potential scams aimed to make you lose your cryptocurrency investments.
1. Blackmailing/scam emails
This particular swindle most notable in Bitcoin circles, blackmail is the process of threatening users with the release of their sensitive information (such as address, phone numbers, etc.) unless they are reimbursed, usually financially. In this case, scammers use this method to extort cryptocurrencies from their chosen targets.
These scammers usually take their time finding or tracking, some even going as far as fabricating, sensitive information about you and leveraging it against you in that you are forced to comply with their demands.
One of the most secure ways to avoid this being careful of the data you readily offer websites: choose stronger usernames and passwords, regularly purge your history, empty your caches, and make sure to use two-factor authentication as much as you can. If the information they blackmail you with is false and you know it, you may be in the clear.
2. Social media
Anyone who has spent ample time scrolling through their social media platform of choice knows the barrage of seemingly innocent “giveaways” that always seem to pop up every once in a while. Sometimes these people are not “really that kind”, but instead prey on the goodheartedness of impressionable people by offering things that are too good to be true.
If you see posts asking you to send them a single bitcoin/ethereum/litecoin or whichever it is, and they promise to send you triple that amount back; who wouldn’t want that, right? Unfortunately, in some cases, the more tempting the offer the more of a scam it is. That’s a pretty good rule of thumb to follow when dealing with these online dealings.
Always keep in mind that in legitimate giveaways, the original poster shouldn’t be asking you to give something away of your own. It should always be the other way around.
3. Fake exchanges
As the name hints, fake exchanges are exactly that: fraudulent copies of legitimate digital currency exchanges. These scams usually present themselves in the form of mobile apps, but you may also find them as desktop applications or fake websites. Some of these fake exchanges brand their scam so well you wouldn’t know it was fake at first glance, but behind the faux legitimacy, their primary goal is to rip people off.
One tell-tale sign you can start worrying about is these fake exchanges usually target crypto traders and investors by offering them free cryptocurrencies, tempting low-starting prices, low exchange fees, and even gifts. Much like social media giveaway scams, these are too good to be true because they are.
Take the extra time to look into the website or app, dig a little deeper behind their About Us page to find any loose ends, and triple-check every single thing they put out. Make sure to keep a list of websites that you know are proven to be 100% legitimate exchange websites and cross-reference it with the ones you’re not sure of.
It doesn’t matter if you’re a veteran trader or a rookie beginner, phishing comes at anyone regardless of skill status. This fraudulent activity involves a scammer impersonating a person or a company to extract personal data from victims. They do this through a variety of mediums, be it telephone, email, fake websites, or messaging apps.
You’re also to find more instances of this happening on social media, where these scammers will create an entirely new account that from the outside, looks like someone credible in the crypto space. This person will then offer fake giveaways randomly, responding to every comment in the tag or messaging people directly.
To avoid being the target of this, before getting into business with any person online, it’s always a good rule of thumb to verify their identity first. Double-check their tweets and the authenticity of their posts, look at the people they follow or interact with, and then apply vigilance in dealing with online transactions.
5. Pyramid schemes
Although this is not a fraudulent scam exclusive to cryptocurrencies, it is another one that pops up regularly within the trading circle. In any case, it almost always involves a participant bringing in a new member with the promise of incredible returns. As the pyramid scheme grows, the older members earn an increasing stream of revenue as the distribution costs are passed from the lower to the upper levels. Only because of the exponential growth, the model is not sustainable for long.
If you are a bottom-line member, chances are you won’t see returns on your profit for a long, long, long time. As with the case with any get rich quick scheme, this is another one that’s tempting to fall into because of the convenience of the model it is marketed to. But with anything in life, nothing worth having comes easy and you have to put in the work.
With every new technology being introduced to the world, frauds and scammers will continuously evolve along with it in search of a place to thrive. Digital currencies are easier to crack through, given their borderless agency; but don’t let yourself be fooled into giving away your life’s work for a temporary shortcut.