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5 Common Scams in Crypto (and How to Avoid Them)


As the popularity of cryptocurrencies continues to increase and evolve, and more and more people join the cryptoworld bandwagon it becomes easier to scam users as the quantity of people to target increases. There are numerous precautions you can take, and whilst it is never possible to be 100% safe from hackers and scammers, you can significantly lower the risk of being scammed and losing out on financial resources by knowing the problems and the best way to protect yourself.

How to Protect Yourself

There is one key principle that one should always uphold when looking to be secure on the internet. The principle is quite simple, to research as much as possible and then research some more.

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The key factors that run throughout the scams are all quite similar in essence. By using common sense, it can be far easier to avoid a number of these scams. By being as skeptical as possible about certain things, you can be prepared for certain cons and scams that may appear. The simple rule to keep in mind: “If it sounds too good to be true, it probably is.”

Here are some of the more common scams to be aware of.

#1: Cloud Mining Services

Cloud mining scam websites look to vitcimize mining community users and vulnerable amateurs (noobs). If you’re in the camp of people who would prefer cloud mining to hardware mining, you need to be extra careful in this respect.

There are a lot of tricks that scammers would user here such as keeping their domain hidden and not being registered to a real user at any point. Other tricks involve registering the company in a reputable place like New York, but the directors all being foreign residents, do not trust from registered place, it can be easy editable.

#2: Multi-Level Marketing (MLM) Schemes

Bitcoin MLM (multi-level marketing) schemes use the common aspect of network marketing (also known as direct selling) and exploit the popularity of bitcoin to make a scam. They are full of claims which are exaggerated and make the user feel that he can make money quickly and efficiently, if someone is coming to ensuring you 1000% profits in 1 years time, problably is scam.

These schemes can be identified very quickly and easily though as they all have one thing in common. They are not actually selling any product or service. Instead they invite you to join a complex group with lots of levels like Egyptian pyramids, and normally require some sort of fee or upfront payment. At the end of the day, though, there is nothing real there and you’re simply left with a complex pyramid scheme.

#3: Bitcoin Investment Packages (BIPs)

Bitcoin investment packages are another type of scam in the Bitcoin world. Bitcoin investment schemes are not unlike  cloud mining scams in the sense that they promise returns, profits and pay out small daily returns until one day all payments stop and the scammer runs off with users’ invested funds. Like the former, bitcoin investment scams in effect, Ponzi schemes.

Since these “investments” usually seem extremely profitable at first as daily payments are being given gained by those using it, customers will tend to re-invest their earnings into the scheme to gain more profit. Once users attempt to withdraw their earnings, however, this is when the problems tend to begin and the money invested disappears.

If you do want to put funds into a digital currency investment service be sure that the firm offering the service is adequately incorporated and has reputable industry professionals running it. In addition to this, ensure that the investment strategy they propose is clearly outlined and coherent. Nothing, is certain in the investment world and less promisses of profits, so beware of companies who guarantee returns.

#4: Identifying Fake ICOs

Fake ICOs can be harder to spot nowadays are scammers get more and more sophisticated. An Initial Coin Offering looks to sells coins, and many of these sites have detailed information and even white papers you can read. However, there are still some tips to look out for in the case of these.

An established reputable company is less likely to scam you given the fact that they are bound by government regulations of a country anyway and are unlikely to be able to run far. In addition to this, one should look if the senior management team have a strong presence on social media as well as reputable reviews. A startup will not normally look to exploit certain factors which sound too good to be true, so look out for that as well. Do your own research, you can check team profiles in Linkedin for example.

#5: Pump-and-Dump Schemes

Pump and dump schemes are a relatively elementary kind of scam. This form of conning someone normally involves artificially inflating prices of less popular coins with low market cap or low volume, by spreading untrue information in an attempt to generate interest in the token and “pump” it.

The culprits in these schemes tend to be individuals who are known as the “pumpers”. These are the market players that “pump” a token— most often an unpopular cryptocurrency which is seldom desired. These players buy up significant amounts of these coins and attempt to ‘pump’ them across numerous social media platforms. Once the token’s value has artificially risen, they dump the token to unsuspecting investors and depart.

To avoid this, simply look at the market capitalization of coins, if they are low but the coin has a high price and sudden random surge, it is likely that this value was artificially doctored by the fraudsters.

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