This question is on the mind of a lot of people. How to Avoid Crypto Scams. As we have moved into a new era on the digitization of assets, people ask, are there safe ways to invest in cryptocurrency, and why are the potentials of scams so high?
In today’s article, we break down scams and how you can avoid losing valuable investments in cryptocurrency.
Cryptocurrency has been in the fight for domination over the fiat form of money for years. In recent times there has been a surge in the number of scams pulled off by individuals. The first thing to note is that scam artists don’t move into unprofitable ventures. The reason why there are so many crypto scams is that there is a pool of profit that exists in that market. The cryptocurrency industry is one that has been attracting a lot of excitement and a lot of scammers.
How to avoid Crypto scams
Just like bank robberies and other heists pulled off on a group of people, there are risks in every financial market. We can minimize these risks by educating ourselves on
- The reason why people fall for scams
- The different ways scams take form
- how to avoid scams
Cryptocurrency is in a battle to replace traditional money. Its most appealing feature is its decentralized nature, which means no bank or government or authority oversees it. The idea of having complete control over your own money and where you send it to.
Imagine being able to send money to anyone, anywhere in the world, without having to go through banks or pay charges or worry about exchange rates. The same high hopes held for the good use of cryptocurrency is the same that scammers are tapping into.
A scammer can deceive you into sending money to him from anywhere in the world, and no authority or government has control over that money.
Over $9 billion is lost on crypto scams per day, and over 60% is from fraud and theft. Having ways to identify scams isn’t just random knowledge; it has become an asset.
So why do scams always occur?
To buy crypto, you need to use real money. And while you don’t have to deal with bank hassles, you have to deal with third-party distributors, and that’s where the scams happen.
As long as the crypto market remains profitable, scammers will always be drawn to it like a shark to blood.
In 2020 alone, crypto scams have reached an all-time high, much higher than the statistics for 2017, with $24 billion taken from unsuspecting people. Some of these scams have taken many forms and have been on the rise.
Types of Crypto scams
From fake giveaways to fake ICO’s. The most popular scams to occur in 2020 would be celebrity impersonation scams, where top celebrities like Elon musk are impersonated. One of the more prominent impersonations fetched the scammers $130,000 in a single day.
Another such popular type of scam in 2020 is the fake exchange sites scam, where they lure unsuspecting individuals into buying or exchanging their crypto to take it all.
Most of these fake websites have also collected the victims’ personal information and used it to perpetuate more harm.
Why do people fall for scams?
Why do people fall for even the most obvious scams? A single week does not pass without a story of a con artist and his hapless victim. Most of the crypto scams we have heard of are so obvious you might want to shake your head and wonder why people are so gullible. The reason why people fall for scams is often more psychological.
Greed– Greed is the number one reason why people often fall for crypto exchange scams. Crypto scams all have a certain type of bogus promise attached to them. For example, in early 2018, Plexcoin promised its investors an outrageous 1354% percent return in twenty-nine days. While this is so outrageous, it looks, feels, and smells like a scam. Plex coin is still raised and absconded with a large amount of money. Always be on the lookout for crypto investments that promise an absurd amount of RIO; it is a big indicator that the whole operation is a scam.
Easy money– people fall for scams because they want to make money off the bat without putting in any work. That is one of the traits that scammers prey on. It is important to note that before you invest in any cryptocurrency, money is not made easily and the scammers are most probably lying to you. When you read about an investment, go ahead and compare it with the promises of strong startups in the same niche, and if it is outrageous, abandon ship immediately.
Crowd mentality– most people are victims of scams because they believe that it’s got to be true when there’s a crowd. Cryptocurrencies tend to have a tight-knit community around them, and while you might have a room full of people who believe that their coin is profitable, it is still not wise enough to invest. This same case happened when Ruja sang the praise for one coin to high heavens and raised $30 million from three million investors worldwide. Yet this coin and its startup had no whitepaper or visible team, just a bunch of events packed with people. While it might have looked like a real investment, it was a scam. When in doubt, do a background check of the startup founder and the startup team to ensure your crypto is in safe hands.
Carelessness– most people fall for social media giveaway scams because they ignore details surrounding the information. Most of these giveaway scams have been more successful than anyone would think they can be. Asides from hacking celebrity accounts, these scammers create fake profiles and websites that mirror the celebrity they decide to impersonate. Most of these impersonator accounts and URLs have spelling errors and inconsistencies that you can notice just by being very careful. Always take note of URLs’ spellings and social media handles before believing in what the message is. Another way is to spot the language of the scammer. Most email scams are badly written and articulated. Instead, watch out for inconsistencies in grammar s and sentence structure.
Ignorance – the scammers like to play on people’s lack of knowledge. They claim to know so much about cryptocurrency and sound so knowledgeable on the subject. Most of their business models are not sustainable. Any unsustainable business model is never a good investment. When you are about to invest in any cryptocurrency, make sure you understand the business and algorithm behind your profit.
Money first, consequences later– the horrible thing about the cycle of a scam is that it produces more scammers. This is seen with Ponzi schemes. Many people now Ponzi’s are scams, but go ahead to place their money in the hand of fraud. They believe if they act fast enough by bringing others on board, they can get returns on their investment before the entire operation shuts down. Resist the urge to invest in cryptocurrencies without proper business structures and don’t place money before business integrity. This way, we can curb scams one person at a time.
Have you experienced any crypto scams? And what have you learned from the experience? Do tell us in the comment section?