Cryptocurrency trading can be a great way to make money, but it also carries some risks. You need to be aware of certain crypto scams to protect yourself and your investments. Read on to learn more about the nine most common crypto scams and how to avoid them.
Multi-Level Marketing (MLM) Schemes
We often believe those close to us when they refer us to a product or service. For instance, if you have a family member who is an avid Everygame Poker player, chances are you will be more likely to trust their advice and try the service out too. Similarly, scammers use this tactic to get people to invest in their MLM schemes.
Although multi-level marketing programs are not necessarily scams, they can have very high fees and complex investment structures that often leave people feeling confused.
Before investing in such schemes, conduct thorough research to ensure the company is legitimate and you understand all the associated risks and rewards. Additionally, be wary of any company offering “guaranteed returns” or excessive compensation plans.
Phishing Scams
This scam involves hackers trying to gain access to your cryptocurrency wallet. They typically do this by sending out emails or text messages that appear to come from a trusted source, such as an exchange or wallet provider, with links or attachments that contain malicious software designed to steal your personal information. To protect yourself from these types of scams, never click on links or open attachments from unknown sources.
Ponzi Schemes
A Ponzi scheme is when someone promises investors high returns with little risk, but the reality is that they are just using new investors’ money to pay off older investors. These schemes will often involve cryptocurrencies because they offer anonymity, making it easier for scammers to get away with their fraudulent activities.
To protect yourself from becoming a victim of a Ponzi scheme, do your research before investing in any cryptocurrency project or venture and only invest what you can afford to lose.
Pump-and-Dump Scams
This type of scam involves buying up a large amount of an altcoin (an alternative coin) at a low price and then selling it at an inflated price once the price has gone up due to false hype created by the scammers themselves.
Pay attention to the news and always be wary of sudden spikes in prices for coins that have been around for a while without any major developments taking place.
Pyramid Schemes
Pyramid schemes are similar to Ponzi schemes in that they involve investments with unrealistic returns promised by the scammers who run them. However, pyramid schemes involve recruiting more people into the scheme for those at the top of the pyramid structure to make money off those below them rather than simply relying on new investments coming in from outside sources, as is done with Ponzi schemes.
Be skeptical when presented with an investment opportunity that promises high returns with little effort required on your part; if something seems too good to be true, it probably is.
Malware Attacks
Malware attacks are another common crypto scam where hackers install malicious software onto unsuspecting victims’ computers to gain access to their private information and cryptocurrency wallets (e.g., passwords and PINs).
To avoid being a victim of such, ensure that all your software is up-to-date and regularly use virus scanning software on all your devices connected online. This will help detect any malicious activity before it has a chance to cause any damage or theft of data and crypto assets.
Fake Exchanges
Fake exchanges are when scammers create websites pretending they are legitimate cryptocurrency exchanges, but instead, they just take people’s money without actually providing anything in return (e.g., tokens or other digital assets).
Do your research before investing in any platform to avoid falling for one of these fake exchanges; keep an eye out for clues like a lack of online customer reviews or testimonials or a lack of contact information anywhere on the website that might suggest something suspicious is happening behind closed doors.
Exit Scams
Exit scams occur when cryptocurrency projects suddenly “exit” without notice after raising funds from unsuspecting investors. This happens because either there never was an actual project being developed behind closed doors or because those running the project have decided it’s no longer worth continuing with development due to various factors (e.g., lack of interest or investment).
To be safe from exit scams, be sure to do your research before investing in any crypto project and pay attention to any red flags that might suggest something shady is going on. For instance, if a project has been around for a long time without any major developments, it might be worth looking further into before investing.
Cloud Mining Services
Cloud mining services allow users to mine cryptocurrencies without having their own hardware, as companies provide the necessary resources needed for this task. The user simply pays for a certain amount of mining power and receives rewards based on the number of hashes they’ve mined.
Unfortunately, some cloud mining services can be just as fraudulent as Ponzi schemes, where the company running it keeps additional fees or simply disappears without a trace after collecting user funds. Therefore, it’s important to do your due diligence and research any cloud mining service you are considering before investing.
Conclusion
Cryptocurrency trading carries both rewards and risks. However, by being aware of common crypto scams and watching out for red flags like unrealistic promises or lack of transparency, you can help reduce the risk. Remember, knowledge is power, so stay informed and become a savvy investor today to take control over future financial security tomorrow.