The rise in cryptocurrency has given investors some unparalleled opportunities but has inversely introduced more scams. As the concept of digital currencies starts being mainstreamed, so too are the methods employed by fraudsters continuously in evolution to take advantage of uninformed or less knowledgeable users. Knowing how to identify and avoid such schemes will safeguard your investments. Here is what every investor should know to avoid common scams in the crypto world.
Choose a Reliable and Best Crypto Exchange
One of the safest ways to protect yourself from scams is to use reliable and reputable cryptocurrency exchanges. Large and well-established exchanges like Coinbase, Binance, and Kraken have an extremely good record when it comes to security and protection of customers. The best crypto exchange platforms follow strict Know Your Customer and Anti-Money Laundering policies whereby users’ identities are known, and their funds are safe.
Moreover, solid exchanges provide two-factor authentication of users, cold storage of funds, and insurance against the loss of digital assets. Using well-established exchanges reduces fraud risks and also makes the trading and management of your cryptocurrency much safer.
Scammy Initial Coin Offerings (ICOs)
Among the most common scams during the nascent days of cryptocurrency, fake ICOs were also rampant-and they continue to happen to this day. A scammer is going to hype some fake ICO as some new cryptocurrency or blockchain in which huge returns are promised. Convincing websites, whitepapers, and even social media buzz get created to invest in tokens well in advance before the platform goes live. The thing is, it never does, and the scammers just disappear with your money.
For this reason, you always do your research on the project and the people behind it. You make sure the people working on the project come from credible backgrounds, have great track records, and that the community reviews them well. Also, beware of projects that have clearly defined development roadmaps and projects in which the partnering or advising companies on the ICOs come as names with prestige.
Phishing Attacks
Quite common in the crypto world are phishing scams. In essence, it is a type of scam where fraudsters create a fake website or email to deceive users into giving them their private keys or wallet details. More precisely, for instance, a scammer can create a full and exact duplicate of any major cryptocurrency exchange, then send you a link just like that. The moment one logs in using his or her credentials, they gain access to his account at that very instant and hence steal money.
To protect yourself against phishing, make sure you check the website’s URL every time you visit any website, especially when you want to access an exchange or wallet. Activate 2FA to make it more difficult for others to hack, and do not share your private keys with anyone. Bookmark official websites of the exchanges and wallets that you use and never click on links from unsolicited emails or messages.
Pump-and-Dump Schemes
In a pump-and-dump scheme, scammers artificially drive up the low-volume cryptocurrency price by touting false tidings about its prospects. They lure investors to buy the coin and drive the price even farther upward. At peak price, they sell their portions and prices crash, thus leaving unsuspecting investors with worthless coins.
Next, to avoid the pump-and-dump schemes, beware of coins that suddenly surge without actual news or development to justify an increase. Also, avoid online forums or social media groups promising sure profit from certain coins. Go for that kind of cryptocurrencies which basically have their fundamentals intact and are performing on the ground.
Scam Exchanges and Wallets
Bad actors also make sham cryptocurrency exchanges and wallets that are designed to look and feel like their more legitimate counterparts. Such exchanges will lure users by offering low transaction fees or listing coins that can’t be found on other platforms. The moment users deposit their cryptocurrencies into such services, those funds are gone for good.
Always use famous, well-established exchanges/wallets. For any platform where one is depositing their funds into, its legitimacy has to be validated through reviews, numbers of active users if regulated, and insured. One can also make use of hardware wallets, which are way safer and keep private keys offline.
Ponzi and Pyramid Schemes
Both Ponzi and pyramid schemes normally enter the cryptocurrency space in the form of investment platforms that promise very high returns with no risks. In such schemes, recruitment is very crucial since funds from new investors are used to pay those who invest earlier. Eventually, it gets to a time when recruitment is no longer effective, and then the scheme collapses, leaving the majority of its participants in the dust with losses.
First, avoid those platforms that offer an aftermath that seems incredible, as such might plunge you into Ponzi or pyramid schemes. The truth is, a real investment involves some level of risk, and any person promising guaranteed returns is probably trying to scam you. Have a look at the fine print and request evidence for proof of how it generates its revenue.
Using Secure Platforms Like Level X
To this avail, reputed companies like Level X offer secure environments to trade and manage your crypto assets. It lays emphasis on transparency and has strong security measures; hence, these can be considered a safer option for investors. When in doubt, one of the best ways to protect your funds from scams is to remain glued to well-established platforms that boast strong reputations.
Conclusion
While this holds a lot of promise, there is greater reason to show care about investment scams. Knowing current fraud types and maintaining best practices, such as homework, secure platforms, and privacy protection, will go a long way in minimizing the chances of you being taken in by crypto-related scams. If it sounds too good to be true, then most likely it is. Stay safe and stay informed.