The cryptocurrency market is prone to scams. Additionally, because cryptocurrencies are relatively newer than most other assets and investment choices, it is often easy to fall for these scams. That is why it is important to know the most common cryptocurrency scams and how to protect yourself.
This article discusses three common cons plaguing the crypto community and how to avoid them.
Investment and get-rich scams involve a crypto scammer–or a group of them– convincing a few people to send them their coins or tokens for investment purposes, with promises of crazy returns or earnings.
How to avoid investment/get-rich-quick crypto scams: Buy from reputable sources
If you’re considering buying cryptocurrency, you must do your due diligence before committing. As with all other assets, the best advice is to buy only from reputable sources like SoFi cryptocurrency investing.
Buying from reputable sources can give you a degree of security, especially because the best crypto marketplaces and investing platforms have good investment advice and tools you can use to make informed investment choices.
Crypto-jacking involves a scammer infecting a victim’s computer and using it to mine cryptocurrencies.
The idea is to ensure that the victim stays oblivious to these activities on their devices. Since crypto mining is expensive, scammers want to reap the benefits without incurring the high costs of mining.
After injecting the malware, it runs a background program that uses computing power to solve the complex mathematical problems involved in mining crypto tokens, with the mined cryptocurrency going to the scammer’s wallet.
How to avoid crypto jacking
- Ensure that any software you install on your devices is from a reputable source.
- Avoid clicking on links that seem suspicious. Even if there are no malicious apps or files in an email or social media post, be wary of all links from unknown or suspicious-looking sources.
- Always use Ad Blockers. If something looks suspiciously like an ad link but doesn’t feel right, block it just like any other suspicious page.
The pump-and-dump scheme
The pump-and-dump scheme often involves crypto investing ‘gurus’ and social media ‘influencers’ buying up a ton of a lowly-priced crypto token, then hyping it up on social media, all to manipulate the market by artificially inflating the asset’s price.
Often, these scammers will do their best to convince their target audience how impactful that token will be to the future of cryptocurrency. Once there’s a significant pool of interest, and the token’s price appreciates, the scammer(s) then liquidate/dump their token holdings at high prices, devaluing the asset for everyone else.
Here’s how it works:
- Someone creates an ICO or token sale to raise money for their project (usually in exchange for Bitcoin or Ethereum).
- The creators then announce they have created something revolutionary and will soon change the world as we know it. They make promises about how much money they will make and how much impact their company will have on society.
- They promise investors huge returns on investment while describing their vision as “the next big thing.
The goal is to artificially inflate a token’s price and then sell it at that inflated value, turning a profit in the end.
How to avoid the pump and dump scheme
- Don’t fall for hype: before buying any cryptocurrency because it’s all over social media or because everyone is talking about it, research it as if your financial well-being depends on it because it does.
- Don’t invest in an Initial Coin Offering (ICO) just because you read about it on social media; remember that researching everything is the most accurate way to make informed decisions.
- Ask questions if something seems too good to be true or doesn’t make sense.
This list of common crypto scams should help you avoid falling prey to them. In parting, remember that diligently researching every crypto coin or token and buying your tokens from reputable sources is the best way to protect yourself from common crypto scams.