The value of Bitcoin has gone through the roof in the last decade. Today, one bitcoin goes for around $54,000. This is impressive, considering that it was a dollar in 2011. As a result, many investors have made a fortune off Bitcoin. Unfortunately, not everyone has been so lucky.
Due to its demand, unsuspecting investors lose their hard-earned money and sometimes entire life savings.
According to a report in the Wall Street Journal, investors lose $ 4 billion through cryptocurrency scams yearly. This article looks at the top five bitcoin scams and explains how to read the signs and avoid them.
- Fake Bitcoin Exchange Platforms
Bitcoin exchanges are a marketplace where anyone can buy or sell cryptocurrencies. For most people, this is the easiest way to get your hands on bitcoin. You sign up, link a payment option, and start trading. However, not all exchanges are legit.
You should stick to well-known crypto exchanges to avoid bitcoin scams. Any website that promises wild returns in the first few days is suspicious. Other red flags include encouragement to invest heavily and giveaways.
- Fake Cryptocurrencies
New cryptocurrencies seem to crop up everywhere. Each new crypto promises its users to be the next big thing. Since Bitcoin is now too expensive for most people, they fall prey to these most recent and cheaper options.
Fraudsters take the money and transfer it to their bank accounts. The best way to avoid fake crypto is by doing your homework. Look at the maximum number in circulation and the team behind it. To be safe, only invest in known altcoins.
- Pump and Dump
Pump and dump schemes existed way before Bitcoin came into the picture. Brokers used this method during the height of the economic crisis in 2008-2009. Pump and dump in the crypto market involve inflating the price of an asset to attract investment.
The hype spreads through fake news and misleading statements. Once the public falls for it, the fraudsters dump their share, taking advantage of the rising prices. In the end, investors remain with worthless assets. Avoid any deals that sound too good to be true.
- ICO Scams
Initial Coin Offering (ICO) is the IPO equivalent in the crypto market. It is a form of crowdfunding for new cryptocurrencies starting, and the investors receive tokens in exchange for their monetary compensation. Due to the risk of fraud, the Securities Exchange Commission (SEC) insists on registrations.
Some of the biggest ICO scams include Pincoin, Plexcoin, and, more recently, Centra Tech. To avoid ICO bitcoin scams, research the team behind the offer. Only invest if they are reputable.
- Hacking and Malware
Cryptocurrencies are not physical cash. Until you sell your assets or convert them into cash, it remains digital. The safest place to store your crypto is in a crypto wallet. And although most wallets are impenetrable, they still get hacked. The weakest link is usually the account holder.
If you have a hot wallet, hackers can use malware to obtain your login credentials. Once they are in, they can drain your account of everything. Methods of securing your bitcoin include two-factor authentication, encryption, and secure your private key.
Final Thoughts
Hopefully, this article helps avoid common bitcoin scams. Like all other investments, you should always do your research before investing. For cryptocurrency, you must look at the team behind it. Consider their reputation and anything else they have done in the past. If it doesn’t feel right, don’t do it.
