How To Avoid Cryptocurrency Scams – Basic Guide

Cryptocurrencies have experienced rapid growth in recent years. With such a boom in fame, others want to be a part of it as well. Unfortunately, this opens the door to a slew of frauds and scams that could jeopardize your portfolio. This article will teach you how to prevent cryptocurrency scams and other types of fraud. Let’s take a look at some of the most common crypto scams and how to avoid them.

Scams are not a new occurrence; they have existed for centuries. They often prey on those who are unfamiliar with a particular area, in this case, the crypto sector. Furthermore, because crypto is unregulated, big hacks can occur with few repercussions. Make sure to thoroughly study this post to learn more about how to avoid such problems.

What Is a Cryptocurrency Scam?

To begin with, a cryptocurrency scam occurs when someone attempts to obtain personal data such as security codes or dupes an unwary individual into sending cryptocurrency to a hacked digital wallet. Furthermore, they might be labelled as scams when the person behind them makes misleading promises, among other things.

Cryptocurrency scam projects are mostly unknown in the crypto business, and they appear to be a perfect way to make quick money. However, most of the time, you will lose all of your invested funds.

Some of the biggest crypto scams

(Some of the biggest crypto scams. Source: CrytpoSlate)

Unfortunately, because the crypto sector is mostly unregulated and so many individuals are keen on investing in virtual money, it is riddled with scammers and crooks. Before you decide to invest in anything, make sure you do the following.

Six Steps to Avoid Crypto Scams

Step 1: Do Extensive Research

Being an educated consumer is the absolute most effective way to prevent being a victim of a crypto scam. Do not purchase any cryptocurrency unless you have thoroughly examined the following factors: creation date, owner/creator, how many coins are produced, and what value they provide. 

You may also look at their social media following to discover how genuine their fans are. You may also see whether the project’s owners are public, what their track record is, and what they plan to accomplish in the future.

You may compare them to other legitimate and well-known cryptocurrencies to see if there are any similarities. Simply do your own studies and you should be OK.

Step 2: Secure your Crypto Wallet

If you are purchasing virtual currencies and putting them in a crypto wallet, you should be certain that your digital wallet was created by a reliable organisation with a proven track record. This is not difficult since reputed wallets often have more features than others, thus switching to a trustworthy wallet is necessary. Metamask is known as a very reliable digital wallet.

You should attempt to avoid using your cryptocurrency wallet on public wifi. Going for two-step authentication is also encouraged, as is password securing your devices so that if somebody steals your smartphone or laptop, they will not be able to get into your digital wallet.

Step 3: Use Multi-factor Authentication

Multi-factor authentication makes your digital wallet much safer than it was before. It virtually makes your wallet unbreakable, so you should always use multi factor authentication. Anyone who gains access to your account will be unable to enter immediately owing to multi factor authentication, as you will be required to confirm it with a code given to you. However, if you get a code that you did not request, be cautious and wary since someone may be attempting to trick you into giving them your code.

Step 4: Check Websites

You should avoid entering your personal information on every webpage that is not encrypted, since this might lead to your private details being stolen. Before trying to log in, verify the website URL to ensure that it is real and that it begins with https rather than http. If it does, then you are on the right track.

You may examine the legitimacy of the website you want to visit by looking at it in comparison to other respected websites. This may be done for a number of purposes, including checking to see whether a project is phoney or not, amongst other things, and it is possible.

Step 5: Trust Verified Sources Only

Consider only putting your money into cryptocurrencies that are promoted by reputable companies or organisations if you want to avoid falling prey to a cryptocurrency-related scam. Another way to verify that the cryptocurrency is not a scam is to check if is has a smart contract audit. You might alternatively put your money into stocks; these more conventional and regulated investments come with a far lower risk of being taken advantage of.

If you follow these six guidelines, there is a good chance that you will be able to keep your money secure even in a period when fraud is widespread in the world of cryptocurrencies.

Step 6: Be Wary of People

There is a lot of poor advice pertaining to cryptocurrencies floating around the internet, and you don’t want to make the mistake of listening to someone you shouldn’t so you don’t get duped. Do not accept financial advice from various celebrities, persons you meet on social media or online forums, or anybody else who you do not know well and who does not have a strong background in finance.

Types of Crypto Investment Scams

There are a significant number of crypto scams now operating, but some ones have gained much more traction than others. Because being aware of them can help you avoid falling victim to them, here are some of the most common cryptocurrency scams currently being perpetrated.

Pump and Dump Schemes

Pump and dump scams are really well-liked among people out there. Fraudsters will send out a mass email promoting a certain cryptocurrency, or they may use social media and online influencers on platforms like Twitter and Telegram to promote the cryptocurrency they are trying to sell. Because they did not want to lose out on the opportunity, traders rushed to acquire the coins, which drove up the cost. After the con artists have been effective in driving up the price, they will sell their holdings, which will result in a collapse since the value of the asset will drop dramatically.

Fraudulent Websites

Con artists may occasionally construct imitation copies of authentic cryptocurrency wallets or false marketplaces for cryptocurrencies in order to defraud victims who aren’t paying attention. These phony sites often have web addresses that are almost identical to the ones they are attempting to imitate, but with a few minor variations. 

They seem to be quite identical to genuine websites, making it exceedingly difficult to differentiate between the two. It is important that you take the necessary precautions to ensure that you are not disclosing any of your personal information to an unauthorized website.

Phishing Scams

Phishing attacks using cryptocurrency frequently seek data related to online wallets. Thieves go for the private keys to cryptocurrency wallets since these keys are necessary in order to retrieve the assets stored in the wallet. Their technique of operation is comparable to that of other phishing scams and is associated with the bogus websites that were discussed before. 

They sent a message to users with the intention of leading them to a webpage that was developed specifically for the purpose of requesting private key information. When the attackers have this data in their possession, they may then steal the assets that are stored in the wallet.

Giveaway Scams

In a giveaway scam, con artists will make a promise to double or even triple the amount of money that is delivered to them. A clever message that comes from an account that often seems to be legitimate on social networks may provide the impression of authenticity and stimulate a feeling of urgency. It’s possible that individuals would rush to transfer money in the hopes of making a profit immediately if they believed it.

Fake Apps

This happens quite rarely in the cryptocurrency sector. But con artists also often take advantage of those who invest in cryptocurrencies by creating fraudulent mobile applications that can be downloaded from online marketplaces like Google Play as well as the Apple App Store. Even while these fraudulent applications are rapidly discovered and deleted, this does not imply that they are not having an effect on the many people that fall for them.

Blackmail Scams

Blackmail is yet another tactic that con artists utilize. Hackers send messages to individuals in which they pretend to have knowledge about their data and threaten to reveal it if they do not either give their private keys to the fraudster or transfer assets to them. Although this occurs very rarely in the crypto realm, you still need to be aware of its existence.

Crypto Mining Scams

The term “cloud mining”  is usual given to businesses that will let you borrow mining gear that they run in return for a flat charge and a percentage of the money that they are expected to generate from the venture. In principle, this makes it possible for anyone to mine afar without having to invest in costly mining gear. However, a large number of cloud mining organizations are frauds or, at least, unproductive, meaning that you wind up taking a loss or making less than what was promised in their advertising. Nonetheless, always make sure to check if the organization is not like other crypto scams

Takeaways

  • Cryptocurrencies have experienced rapid growth in recent years, but unfortunately, this has opened the door for a lot of crypto scams out there.
  • Cryptocurrency scam projects are mostly unknown in the crypto business, and they appear to be a perfect way to make quick money.
  • Make sure that your crypto wallet is secured in every possible way, apply a multi-factor authenticator and do not use your digital wallet on unsecured networks.
  • Always do extensive research behind a new project that you want to put your money in, make sure that it backed up by renowned sources.
  • Check the website you use and make sure that it is secured. If it starts with https and if so, you should be fine.
  • Don’t trust every person on social media, some of them are willing to scam you and even more make false claims about making money on a project.
  • Always make sure to invest only what you can afford to lose, the best way to avoid scams is being wary and informed about them.