What is Cryptocurrency
In simple terms, cryptocurrency is a digital and a decentralised form of currency that runs on an open-source computer code. Cryptocurrency means free transactions that are always encrypted and remain confidential. It can be used for peer to peer communication and can be transferred from one party to another in seconds. However, like any other currency, there are many that are fraudulent and will turn your life upside down.
What is a Cryptocurrency Scam?
Many cryptocurrency trading platforms and brokers are scamming users in different ways. But, the most common scam is the one where they ask users for money. The other way they trick users is to tell users that they have lost money due to technical errors and they request users to compensate them with money.
The Rise of Crypto Scams
Several things have contributed to the rise of these scams. For one, there are no clear guidelines or rules about the process of buying cryptocurrency. Some customers make the mistake of trusting the broker, the platform, and the manager. Once they get scammed, they often do not have a second chance to cancel the transaction.
Another reason is that cryptocurrencies do not have a digital or printed form. At this time, consumers and investors alike are mostly ignorant about the fact that they are dealing with coins and not physical dollars.
Given the fact that online payments are also an issue, some crypto transactions often are subjected to payment processors.
Types of Scams
There are many types of scams that can be encountered in the crypto world.
1. Fake advertisements: On the website of any cryptocurrency exchange, a user can see advertisements that claim that you can get a certain amount of bitcoin on the spot. While this is true in a limited sense, the risk involved is too high. Instead of trusting them blindly, you should visit a real website that will explain in detail how to trade cryptocurrency.
2. Scam site: Most of the time, these websites offer nothing but phishing to lure you into believing that you are in for easy gains. Instead of investing in a legitimate exchange, you should use official sites. There is no need to provide any personal information on the website since it will be used to exploit your private data.
Elevator Pitches
Elevator pitches are common among the recruiters and employers. An investor will be offered a chance to see their business from a private office and meet the management team. However, the investors are offered fake products and services in exchange for their money. They promise returns that are way above market and they want to create a market for the products that they are offering. All of the professionals working in these companies have no idea that these companies are scammers because they are not working on an application but on stock broking platforms.
Lowest Price on the Site
You’re probably a sensible investor and you won’t be tempted by the price on the site. But, in the world of crypto, any low price is a scam.
Pump-and-Dump Schemes
Pump and dump schemes are very easy to recognize. The perpetrator simply purchases a significant amount of stocks and then places a large buy order that has little or no support from clients or other markets. The stock prices skyrocket as the buy order goes through, which creates the illusion that the stock is doing well. Then, the stock starts to plummet and eventually dies completely. Once the scam is over, the pump-and-dump scheme happens again, with the exact same script and the same low price to begin with. Pump-and-dump schemes are almost always associated with stock scams, not bitcoin ones.
Broker Platforms and Scams
Investors are constantly going into crypto investments and leaving in tears. Cryptocurrency investments are becoming more complicated than ever.
Tips to Prevent Crypto Fraud
When you encounter people that claim to have invested millions of dollars in a cryptocurrency, it’s easy to think that they’ve done so based on their own hard work and due diligence. The truth is that they’ve used financial information taken from an investment brokerage website and have lost their money in an instant due to improper management of funds. If you’re a new investor and have any doubts at all, you should avoid using online brokers. It can be difficult to conduct a proper due diligence when you’re doing so from an unfamiliar territory.
Trusting someone you don’t know or trust that you don’t know or trust can lead to you being taken advantage of, financially and psychologically.