It seems like Bitcoin has regained life after having been on the decline since the last bull run in late 2017. Better yet, Bitcoin is bringing the rest of the market with it, and investors and traders are now rushing to get their piece of the cake.
But it’s not without risk, and anyone looking to invest in cryptocurrencies needs to be aware of the risks involved as well as the scams to avoid.
Common Cryptocurrency Scams
The main issue with cryptocurrency scams is that there are so many of them and they’re all very different from each other.
One common scam is people that reach out to cryptocurrency enthusiasts on social media with a promise of making them money. Often times the offers sound something like, “all you have to do is to send me $500 and I’ll invest it in my mining rig that will generate $50 for you every day for many years.”
Obviously, all these offers are illegitimate because no one can guarantee you a daily turnover on any type of investment. Also, if it was possible, why wouldn’t you do it yourself? But besides that, cryptocurrency mining is rarely profitable these days, and you need to avoid anyone that claims the opposite.
Another common scam involves fake cryptocurrencies or white papers with empty promises. Two of the most well-known crypto scams are Bitconnect and Onecoin.
Bitcoinnect was sold as the new Bitcoin but failed almost instantaneously and resulted in thousands of people losing their investments. There is still a debate going on as to whether Bitconnect was really a scam or just a lousy project, but it’s clear that you want to stay far away from anything similar.
Onecoin was also sold as the new Bitcoin, but it turned out it wasn’t a cryptocurrency at all but rather a multi-level marketing scam with a global reach. Today, several of the brains behind Onecoin are serving multi-year prison sentences.
Make sure you do proper research and decide which is the correct wallet for your needs. Without proper care and attention your chances of being hacked tenfold.
How To Avoid Cryptocurrency Scams
The above-mentioned examples are only a few cryptocurrency scams that have been around the last few years, and hopefully, you have a better idea of how to spot them. Luckily, avoiding these scams are easier than you might think.
Firstly, you need to remember that if it sounds too good to be true, it probably is. But there is more to it than that.
Most people would agree that there are two main ways of avoiding cryptocurrency scams: you have to only stick to reliable assets, and you have to only use reliable services.
The easiest way to avoid investing in a scam is to only focus on the top 10-15 biggest cryptocurrencies listed on Coinmarketcap.com. These have all proven to be reliable cryptocurrencies, and they are backed up by smart technology and developers. You can, of course, also invest in smaller instruments but you need to make sure you know what you’re doing.
Besides only focusing on the established assets, you also have to pick a reliable service to invest in the said cryptocurrencies. As an investor, exchanges such as Binance and Coinbase are two options that come to mind, but there are several other such as Kraken, Bitstamp, etc. They all have a good reputation and are operating completely legally.
In case you'd rather trade cryptocurrencies, we suggest you find a legitimate forex broker that’s licensed and regulated. Just make sure you use a broker that is trustworthy since not all of them are. For example, in countries like the United Kingdom, South Africa, and Australia, there are several great licensed brokers that one can use, but there are also many unlicensed brokers that are only out to steal your money. Similar patterns can be found in both Europe and Asia. Regulatory bodies for these regions would include the FCA, FSCA, ACIS, and CySEC, which are all considered reputable regulators.
While cryptocurrencies are one of the hottest investment trends of our time, there is no shortage of crypto scams. However, with a bit of common sense and the aforementioned tips, you can easily avoid being ripped off and enjoy the benefits of cryptocurrencies with an ease of mind.