The rave about cryptocurrency is far from over! The numerous opportunities discovered since its inception in 2009 have got people worldwide hurrying to get a piece of the cryptocurrency action. This is further confirmed by findings from Stash, which found that there are over 420 million crypto investors worldwide. However, in addition to giving many the financial freedom and increase in wealth they seek, there is also the dark side. Several crypto investors have reported being scammed of their earnings, therefore, it is vital to stay alert.
Here are a few common cryptocurrency scams you should know and how to avoid them.
1. Pump and dump schemes
One of the quickest yet most damaging crypto scams is the pump and dump schemes. This is usually how the story goes: Fraudsters create a lot of hype about a particular coin to get investors interested. They understand the concept of FOMO (Fear Of Missing Out) in the crypto world and take full advantage of it! Once they have acquired a significant number of investors, the price is then inflated. The scammers would then sell their holdings at an inflated price, usually a significant amount. This leads to a crash in the price and a sudden decline, rendering the client’s investments worthless! To avoid this scam, you must battle your fear of missing out. Don’t be led astray by hype; read more into the advertised coin to learn more about and make more informed decisions about investing.
2. Investment scams
A notable scam worth mentioning is the investment scam. These scams usually consist of a promise to provide “zero risk” investment to make an incredible amount of money. The scam works in several ways. Sometimes it is a so-called “investment manager” unexpectedly calling or texting you with promises of a rewarding investment opportunity. But there’s a catch— you must buy crypto and send it to their account. The website they present to you looks legit, but it’s not! And when you take out your earnings, you can’t! Another popular form of investment scam included the romance scam, where an online “love interest” needs some crypto, making big claims without evidence or explanations and promises of guaranteed increases in returns.
Fortunately, you can employ several safety tactics to safeguard yourself against such scams. For instance, when there are promises of great return, conduct your research to determine how true it is. For instance, if you’re interested in purchasing Polkadot (DOT), it is advisable to look up the price of a Polkadot coin on reliable platforms such as Binance. This would ensure you’re not being misled, and prevent you from being directed to a fraudulent site.
3. Rug pull scams
The rug pull scams are simpler than the pump and dump scheme as it also involves malicious actors attempting to influence the project’s value. In a rug pull scheme, the fraudsters announce a new project, such as a Non-Fungible Token (NFT) or coins investors should take advantage of. However, this is far from the truth. When the fraudulent project begins to gain the attention of buyers, the project will suddenly disappear. This is because the scammers have absconded with your money, leaving you high and dry!
4. Phishing scam
Phishing uses scam emails, texts, and voice calls to trick their targets. In crypto, this happens quite often. It has come to be the most effective method of scamming the perpetrators. The phishing scam aims to gain credentials to access your account, manipulate your sales, and steal from your account. The scammer sends a seemingly harmless website link via text and email. However, the link has been embedded with several harmful malware, viruses, remote access, and other techniques to steal your information. Over the phone, scammers play on your human instincts, such as compassion, FOMO, and other tactics that would get you to expose your credentials. The best way to avoid phishing scams is to be cautious of opening links that don’t look dodgy or from unfamiliar sources.
There are several wonderful advantages to investing in cryptocurrencies, such as fast settlement times, potential high returns, round-the-clock liquidity, and diversification, to name a few. Security is another reason why crypto is a better investment choice. However, the efforts of scammers can prevent you from enjoying this perk. The scams mentioned are not at all the only scams cryptocurrency investors are exposed to. There are several more out there and even more sophisticated crimes being carried out. Therefore be sure to employ effective security measures.