Where there is money, there will be scams
Cryptocurrency trading is a big money market. Over the years, there has been hacks, scams and all types of issues involving unscrupulous ways to cheat money from investors. Because cryptocurrencies exist over the internet, it makes scamming a lot easier.
While we cannot stop scammers from trying to gain a fast buck from gullible investors, the responsibility needs to be on the latter because in this digital age, knowledge is real power! Below are some of the most common cryptocurrency scams that every investor should know and be cautious of.
ICOs – Real and fake ones
First, you need to be aware that to fake an ICO, it is very easy. All you need is to create a hype and people will take note. Most ICOs (both fake and real) will use Ethereum as the platform to issue ICOs. As an open-source project, you can hardly blame Ethereum for this. So, you will really need to read and understand how this works so that you do not get cheated. So, how do you know if an ICO is authentic?
- Whitepaper seems to be copied from somewhere
- An anonymous team of developers
- Execution seems hurried
- No proper roadmaps and ambiguous philosophies
If in doubt, just avoid them. But then, there are those genuine ICOs which are totally genuine but would be too weak to survive post-ICO. Those are ICOs that are hard to determine but you will only realize you have been ‘cheated’ after the issue.
After ICOs, you need to be aware of exchanges because they are the very platform that you will use for trading and such. Take note of exchanges that suddenly appeared (usually out of nowhere) and then making claims that they are the best and that they are number one. You will be depositing your coins with them, so you need to be very careful.
Wallets – Fake Ones
Never ever pick any digital wallet you can find in the market. The launch of Bitcoin saw a lot of fake Android wallets appearing in Google Play Store and this has already become a problem for investors. Whatever the case is, you must carry out proper research before deciding which wallet to use. It is not very easy to identify which is genuine and which one is a scam, so take every review with a pinch of salt before proceeding.
Perhaps the most common scam in any financial and money market, Ponzi schemes will always exist wherever there is money to make. This type of scam is the easiest to spot. If the new cryptocurrency project asks for you to recruit new investors, then it is confirmed to be a Ponzi scheme. Another way to spot this type of project is when they promise you a ridiculously quick way of earning high profits.
Pump and Dump
You will find a lot of such groups on Telegram or other communities. These groups are created (usually totaling to about 50,000 members) to manipulate altcoin prices with low market capitalization. If possible, stay clear from these groups as they usually disappear as fast as they appear.