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Most Common Cryptocurrency Scams & How To Avoid Them

Most Common Cryptocurrency Scams & How To Avoid Them

12/19/2019

The cryptocurrency industry has finally come to a place where Bitcoin, Ethereum, TRX and other cryptocurrencies rise in popularity each day. People are becoming more aware that there’s money to be made in investing in the latest financial technology breakthrough.

As people begin to recognize the potentials and opportunities presented by the cryptocurrency industry, the urgent demand for more information and avenues steadily increase as well. However, despite becoming more mainstream in the aspect that people are more open-minded about the prospects and want in, most of the population aren’t familiar when it comes to the elements and mechanics of cryptocurrency. This means they are susceptible to falling prey to scammers. 

Scammers have been present in every technology generation. With every step in technological advancement that humanity takes, these crooks find their own innovative ways to weave their way into the set system and enforce their ploy.

Cryptocurrency in particular is an ideal playground for these crooks for several reasons:

  1. Crypto is easily digestible → When it comes to information and knowledge, cryptocurrency has yet to reach a place where it is easily digestible by the masses. Despite its growing popularity, few people understand it completely. Scammers take full advantage of this by creating dodgy products and making false promises to feed off the hype.
  2. Anonymity in crypto → Cryptocurrency is mostly anonymous. This is one of the unique features that scammers use to hide their tails.
  3. Crypto is unregulated → It’s an unregulated network. There’s no government or organization that strictly manages the exchanges made. If your cryptocurrency is stolen, it’s safe to say that there won’t be any authorities that’ll hunt down your thief.

Watch Out For These Red Flags

The cautious seldom err, according to Confucius. If you’re looking to enter the crypto world, it’ll do you good to remember these wise words. Cryptocurrency has a truly exciting concept for traders and investors but like all financial investments, its propositions should be approached with logic and caution. Don’t be trigger-happy just because everyone’s jumping in! Make sure you test the waters first, otherwise you might drown. 

If someone calls you up and offers you an investment proposal with no risk and guaranteed returns, the truth is you’re probably getting scammed.

If you receive an email saying that all you have to do is register and send ‘x’ amount of coins to get rich quick, you’re also getting scammed. 

These fraudsters know every trick in the book and for you to avoid these ploys, you should also know them too. When you’re researching a cryptocurrency, always remember to look for the red flags. Before you get drunk on the business presentation, take out your skeptical spectacles and read between the lines of what is not being said. 

Here’s some of the red flags you should pay attention to:

Promises guaranteed returns, unrealistic price growth

No one can guarantee returns in any market or investment, especially in cryptocurrency where the market’s more volatile than stocks and bonds. Reject any company that guarantees profits, and high returns at that, with minimal or no risk at all. It’s just not realistic. 

Aggressive sales tactics and pressure selling

If any company pressures or forces you to buy or invest right that instant, don’t get swept away by their current. Take a step back and think it through. Why the urgency? Investments usually take time to gain speed before it starts to earn. These investment opportunities don’t flourish then disappear overnight. If the proposition is truly as promising as they say, then chances are it’ll stay in the market long enough for you to decide to get in.

Promised commissions for recruiting others

Stay wary of promised commissions for recruiting others  with this one because it’s a big red flag for potential Ponzi schemes. Pyramid schemes usually involve asking current members to recruit or invite other users in exchange for payments, commissions or service. This establishes a network resembling a pyramid where the highest earner is at the top, feeding off the profits coming from those at the bottom. 

Asking for your private keys

At a young age, parents teach their children to never talk to strangers. The same goes for the internet: never give away your private keys, passwords, security phrases or any personal information to anyone on the internet. If a company or organization asks you for these details, it’s more than likely that it’s a scam.

Legitimate businesses don’t use the marketing tactics listed above to attract users. However, don’t get complacent just because you don’t see these initial red flags. Always be vigilant when doing your research. Organized scams are becoming subtler with each ploy and if you aren’t keen at picking out inconsistencies, then you might get tangled in their web of deception. The simplest and most important thing to remember is: if it’s too good to be true, then it probably is. 

Common Cryptocurrency Scams

With the insurgence of virtual coins and cryptocurrency, came with it are various scams and frauds that sprouted like weeds in the ground. Here are some of the most common scams you should know to avoid becoming a victim of any of these ploys:

1. Fake ICOs & Ponzi Scheme

Initial Coin Offerings or ICOs

An initial coin offering or ICO is a type of funding using cryptocurrency. The basic concept is that a company creates coins to sell to investors in exchange for a specific amount of cryptocurrency. The investor can hold onto the coin and wait until the market climbs to sell it at a higher value. It offers no other benefit for your coin other than the possibility that its value will increase enough for you to earn a profit.  

ICO scams function in the same way by tempting investors with a newly created coin. They entice investors with the ‘potential’ of the coin to become the next big thing and that they should hop on before the demand gets too big. 

The truth about ICOs however is that less than 1 out of 10 ICOs become successful enough to become tradable. The concept of ICO is to trade your coin for a higher price, but if the value is low for an indefinite amount of time and cannot be traded then there is virtually no profit to be made. 

Avoid this type of scam by making sure you know everything there is to know about the company. Decide for yourself if the coin they’re proposing truly possesses the potential they are marketing. If you don’t have enough knowledge about the market to make that decision, then you should probably stay out of ICOs altogether.

Ponzi Scheme

Most people know little about cryptocurrency other than it’s currently an industry that has the potential to make millionaires out of investors. With this premise, it’s easy for fraudsters to sweep unknowing people who merely follow wherever the crowd goes into a scheme. These con artists feed off a trader’s greed by making big promises and testimonials of how it works and almost always guaranteeing that it can change people's lives. 

Basically, it’s an organized scheme where people invest on dreams and promises laid temptingly before them. At first, these schemers would make it appear as if there is actually a profit by increasing the numbers on the investor’s accounts in the first few times. 

The Ponzi scheme focuses on marketing strategies to bring more investors and money. When no new money enters the account and old investors no longer get paid, the scheme collapses.

Eventually the company’s services begin to dwindle, from an unresponsive customer representative to delayed withdrawals and technical issues until finally the company disappears— and along with it, your money. 

2. Shady Exchanges & Email Scams


These involve shady emails and giveaways that require you to click a link or provide personal information in order to claim your prize. No one wins anything from just clicking a link and if you’re already on the internet, then this should already be common sense. 

Be wary of limited offers or free giveaways posted on social media that give more value than your money’s worth. No one is giving away money, not on the streets and definitely not on the internet. So steer away from those ‘send “x” amount and receive x amount back’ or ‘get rich quick’ trading platforms. 

3. Phishing Sites

Phishing sites are a cancer in the cryptocurrency world with their subtle and deceiving appearance. This scheme begins with a suspicious email from a scammer posing as a legitimate individual or organization. It can be a government organization or a bank that lures you in with ‘official’ looking documents and statement. The goal of the email is to make you click the link that will lead to a phishing site that has copied a real site. When you fill in the details of your account, the scammers collect personal data from you. 

These sites are usually hard to identify because of its minor changes from the real URL or domain. So make sure when making financial transactions online that you are on the real domain by checking the URL. The URL should be secure and starts with a ‘https://’ not ‘http://.’  Also, be wary of Google Ads that clone exchanges but lead to phishing sites.

You can opt to download web extensions to help you spot and avoid these phishing sites. 

4. Fraudulent E-wallets or Applications

When it comes to picking an e-wallet to entrust your hard-earned coins, it might be better for you to pick the best-known and proven e-wallet services. By choosing the more famous e-wallets, you’ll likely avoid fake e-wallets and applications. 

However, better known e-wallets will attract more imitators. Be wary of fake websites by always making sure you have the right URL. Imitation sites usually trick people with their domain and site appearance so that users log in with their account details. 

Fake applications have also slipped into Google Play and App Store to fool investors into logging in with their real account and unknowingly providing confidential data. Take note of the slight changes between the real and fake sites. Check the grammar, spelling, or even just the colour of the site. Simple inconsistencies like these can make a big difference in identifying the real from the fake. 

5. Pump & Dump Online Groups

The basic premise of the Pump and Dump scheme is to assemble a group of people to buy a product, service or in this case a cryptocurrency. These people surround it with hype to encourage others to buy or invest and then the founders sell their holdings. The market drops and people lose their investments. 

Pump and Dump groups usually use alt coins with a low market. The initiators charge a fee for anyone joining the group. Those who pay more and recruit more to the group get notified sooner of the coin name and the target price. 

The price spikes when buyers are willing to pay more for the products; the prices pump and so does the demand for it. When the coin name drops, the first few who buy the coin at a high rate are the ones who profit the most. These early buyers get to sell their coins at a higher price due to the demand. However, the prices fall when latecomers resell their assets only to find a lack of buyers for their higher priced coins. Prices will fall and the dump occurs that leads to a great loss for most participants. 

6. Hackers & Malware

Hacking and malwares can be absolutely nefarious in the cryptocurrency world. As people rely more on technology for most of their daily needs, the more vulnerable and accessible they become in the internet.

With a digital nature, no market is more affected by these criminals than cryptocurrency. It’s a rule of thumb when it comes to the internet to never click an unknown email attachment, link or website. With just a simple press of a button, your money could be stolen and corrupted by dangerous downloads or programs unknowingly installed in your gadgets. 

The road to accessing safe and secure cryptocurrency exchanges is certainly not by entertaining weird links or websites. When trading or dealing with crypto, exercise extreme caution when installing software, apps and extensions. 

How Do These Scams Work?

Emotional Selling

These scammers hit investors where it hurts. They sell and convince by spurring emotions that will lead to action. By saying things such as ‘Get Rich Fast’ or ‘No Risk, Guaranteed Profit,’ investors get carried away by the excitement and opportunity. 

They induce you with hysteria through creating scenarios of success. Next, they tell you there’s only a small window of chance and you need to act now to achieve your dreams. Giving you a deadline for success creates pressure and hysteria. Some fraudsters even appeal to the greed of investors by promising great returns. 

Deception

Scamming is straight up deception. These criminals will create lies and more lies to make any scenario believable. Some frauds even convince people to invest in their non-existent cryptocurrency over the phone. The point is these criminals are professionals in their craft. If you don’t want to be deceived by them, then you need to be aware of their tricks.

How To Avoid These Scams and Safely Trade Cryptocurrency

Everyone who’s anyone wants to become successful and earn a lot of money. However, nothing comes free in life. In any industry, remember that there’s no easy money in the market. It’s better to stay on the proven methods than risking it all and getting scammed with rose-coloured potentials that only hold lies. 

To avoid these scams and safely trade cryptocurrency, you only need to go through this process of discernment:


1. Stop and Think

The proposal might be promising but don’t get carried away by the emotions that any salesperson wants you to feel. Remember that they are telling you these things not because they are necessarily true but because it’s their job to win you over. Don’t make rash decisions. Take some time to absorb information and let it settle down in your head. 

Ask yourself questions about the company’s reputation. Who works behind the scenes? Are they transparent or anonymous about their team? Scammers value their anonymity so if you can’t find anyone from their team or employees, then you should be more wary. 

Do they have partnerships with other legitimate companies? Does the cryptocurrency have a game plan or is it simply just a concept? Most importantly, are they registered in any organization or country? All of these questions add to the legitimacy of the company.


2. Do your own research

Don’t rely on the information they tell you, instead use that as a basis for your own research. Do your homework and go through legitimate sites and then compare your research to whatever’s been said to you. A better alternative is that you seek out your own cryptocurrency or services rather than investing in the ones that come to you. 


3. Ask Questions

Ask the company questions. If they are legitimate, then most likely they would be willing to give you clear and complete answers. The enemy of scammers is knowledge and information. The sketchier and dodgier they are about their withdrawal process, risks, and fees, the more caution you should exert.

The best approach to any financial transaction is to proceed with reasonable caution. While there are scams and schemes, these things can be avoided with research and skepticism. Don’t let a scam discourage you from engaging with the ever evolving industry of cryptocurrency. It’s true that the market holds great potential but always level your expectations with realistic risks. When in doubt, keep in mind the most important rule of investing: don’t invest anything that you can’t afford to lose.


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