Scammers are on a constant lookout for new ways in which they can steal your money and will do anything to get hold of your crypto. In recent years, the massive growth of cryptocurrency has given these scammers plenty of opportunities to commit crypto scams.
If you’re interested in crypto trading or investing, it’s important for you to be aware of the risks associated with it. In order to safeguard your crypto assets, you need to know about common crypto scams and how to spot them. Read on to know more about identifying when and how you’re being targeted and what you can do to avoid such crypto scams.
What are some types of crypto scams?
Some of the common crypto scams are-
- Rug Pulls
Suppose you are an investor and get approached by a project for capital in terms of crypto. It can happen that when you provide the project members with the required capital, the project members withdraw all the liquidity and suddenly disappear. This is what is known as a rug pull, in which the project is abandoned, and you, as an investor, lose all that you have contributed.
- Investment or Business Opportunity Scams
Generally, there are countless misleading websites that offer so-called guaranteed returns, where you need to invest large amounts. Sadly, these bogus guarantees often end up in financial disasters, and when you try to get your money out, you will surely find yourself stuck!
- Phishing Scams
In the crypto industry, phishing scams target information related to online wallets. Here, a scammer will typically be interested in the private keys of your crypto wallet, which are required to access the cryptocurrency. Like a standard scam, they will send you an email containing links which will direct you to a specially created website and then ask you to enter your private keys. Once they get this information, they can easily steal your cryptocurrency.
- Romance Scams
In “romance scams”, scammers use dating websites. They will pretend to be in a real long-term relationship. They try to win your trust, and once given that, they try to turn the conversations towards lucrative cryptocurrency opportunities. Eventually their talks demand the transfer of either crypto coins or extract your account authentication credentials.
How to Spot Crypto Scams?
When you know what you’re looking for, cryptocurrency scams become easy to spot. Here are some ways to do that-
- Read the White Paper
A white paper for a crypto project describes the protocols and blockchain, and explains the functioning and goals of the entire network.
If you spot a white paper that is poorly written, contains figures which don’t add up, or doesn’t tell you their vision regarding the use of invested amounts, then chances are high for the cryptocurrency to be fake. You can always go through the white papers of legitimate cryptocurrencies Like Bitcoin and Ethereum to compare easily.
- Identify Team Members
The members and developers behind the cryptocurrency are always mentioned in the white papers. Although there are cases where an open-source crypto project might not have named its developers, that is not always the case. If you can’t find any coding, comments or discussions on any forum and the white paper too is full of errors, then it is very likely to be a crypto scam.
- Look for ‘Free’ Items
If you come across crypto coins being offered for free, an investment strategy that promises returns too good to be true, or someone promises you to just “drop” coins into your wallet, you should remind yourself that nothing is ever free or overnight major profits aren’t possible, especially when it comes to money and cryptocurrencies.
- Examine the Marketing
Contrary to popular belief, crypto investments are not usually a get rich quickly endeavor, but are projects with a stated purpose. They have coins or tokens designed to help the blockchain function. You won’t find valid crypto projects creating FOMO (fear of missing out) and showcasing themselves as the next best crypto you shouldn’t miss out on.
How to Avoid Cryptocurrency Scams?
You can take the following measures for preventing crypto scams-
- Safeguard your wallet: Never disclose the private keys to your wallet to anyone.
- Invest in what you actually understand: If you are uncertain about how a particular cryptocurrency works, then it’s best to further research about it before you decide to invest in it.
- Never make hasty decisions: Scammers will generally use high-pressure tactics on you and ask you to transfer money quickly for getting good discounts. Don’t fall for these gimmicks and take your time to research before making crypto investments.
- Don’t trust social media adverts blindly: Social media is a very common tool used by crypto scammers for promoting their fraudulent schemes. They may use unauthorized images of celebrities or high-profile businessmen to appear authentic. Do your due diligence always!
- Use official platforms for downloading apps: Even though it might be possible for fake apps to end up in Google Play Store or the Apple Store, it is always much safer to download apps from these authentic platforms than downloading from random websites.
- Stay away from “make quick money” offers: Companies which promise huge guaranteed returns or show you ways in which you can grow rich overnight are very likely to be crypto scams.
Conclusion
To sum up, you should always be careful of crypto scams if you are involved in crypto trading. Never put in money which you can’t afford to lose, and do sufficient prior research. And finally, if you do still fall victim to crypto scams, you should report it quickly either to your crypto exchange or the relevant regulatory authority.
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