The potential of cryptocurrency market is evergrowing, but bitcoin scams multiply every day.Learn how to spot the scams and how to avoid them.
With the growing potential of the cryptocurrency market, the cryptocurrency scams multiply every day. Therefore, as a trader, you need to learn about the main scams to be aware of and the solutions available to you if you have been a victim.
Scammers have no shortage of imagination to trap investors without experience in the field. Currently, crypto-currency scams continue to increase on the web despite the vigilance of users.
Recognize the main Bitcoin scams
When trading Bitcoin, one should also be aware of the most common Bitcoin scams. The most famous scam is the Ponzi scheme. This technique, implemented in particular by Bernard Madoff, consists of remunerating clients’ investments with new entrants’ funds. The best example is OneCoin developed in 2015. The creators of this virtual currency asked interested users to exchange money for OneCoins. Part of that money went to pay the amounts that other victims expected to receive after they too bought the investment. Problem: This cryptocurrency cannot be traded on any other platform.
- Fraudulent cryptocurrency exchanges
Another popular scam is fraudulent cryptocurrency exchanges. In this case, internet users trust a website or digital wallet to place their Bitcoins or other crypto-currencies. A few days later, the website is no longer accessible, and investors permanently lose their funds. In 2017, a scam using the Bitcoin Gold Wallet cost users the equivalent of three million dollars.
- ICOs scam
For example, in the context of ICOs or Initial Coin Offering, which appear to be a great way to finance innovation, investors should carefully study the proposed project upstream. It often happens that the creators disappear with the investors’ funds. They will then have no recourse.
- Fake mobile apps
Bogus apps, available for download through Google Play and Apple’s app store, are also a good way for hackers to trick cryptocurrency investors. While the maintainers will be able to quickly locate these bogus apps and request their removal, that doesn’t mean they don’t ultimately have an impact. Bitcoin News reveals that thousands of people have already downloaded fake cryptocurrency apps.
- Cryptocurrency mining scam
Online mining can also be some form of scam. As a reminder, the Bitcoin network is secure thanks to the verification of transactions made by miners who use machines with high computing power. The mining of crypto-currencies without the knowledge of internet users or crypto-jacking jumped by 8,500% at the end of 2019.
Tips for avoiding scams on bitcoin and other cryptocurrencies
These few tips can help investors avoid the growing scams in the cryptocurrency world.
Check the blacklist published by the financial regulatory bodies. They regularly publish a blacklist of websites and entities offering investments in various assets such as crypto-assets. Remember to check that the website offering you to invest in cryptocurrencies is on the list of authorized providers.
Do not underestimate the risks associated with investing in cryptocurrencies. Investing in cryptocurrencies is aimed at informed users, with a minimum of technical and financial skill necessary to understand the protocol on which they are based and its risks. Besides, there are other risks: the loss of all or part of the invested capital, the absence of regulations, the absence of detailed information.
Cryptocurrency CFDs: double vigilance necessary
Some online brokers offer users to bet on digital assets like Bitcoin in the form of CFDs (contract for difference) to avoid the technological complexity of direct buying. This situation actually requires double vigilance: proof of the CFD broker’s license on the one hand, and an understanding of how CFDs work on the other. Be especially wary of CFD leverage which can be all the riskier with an asset as volatile as Bitcoin.