Are cryptocurrency scams common online?
In recent years, there has been a boom in the cryptocurrency market. This boom has attracted many new investors. But unfortunately, in the wake of making fast money, many have fallen victim to cryptocurrency scams.
The world has become globally linked as we enter the digital era connected by the internet. So news regarding international activities is at our fingertips 24x7x365. So everyone has heard about cryptocurrency, even if they don’t understand its working.
Since crypto buzz is ringing throughout the world, many have understood one thing even if Wall Street won’t guarantee a safe and secured return; cryptocurrency could introduce potential returns. As the world is slowly trying to recover from the pandemic, many have lost their jobs. As a result, there is a disruption in supply chain management. The rise in inflation and other factors considered, people have figured out that the best way to beat the inflation is by adopting cryptocurrency.
As the interest in cryptocurrency is surging, cryptocurrency scams are rampant. As per a report observing from October 2020 through March 31, 2021, the Federal Trade Commission (FTC) Consumer Sentinel revealed that roughly 7,000 people fell into crypto scams losing more than $80 million. Thus there has been an increase by 12-folds in the number of reports compared to the past years and a staggering loss of more than 1,000%.
Most novice users or investors who are not well versed in the working of the cryptocurrency market fall easy prey to such scams. Unfortunately, not everyone is tech-savvy, and not everyone understands the complexity of the crypto markets. Moreover, many had fallen victims of FOMO or fear of missing out syndrome as many are contemplating that they did not act fast when Bitcoin was trending at an affordable price.
Some have accepted that in the future, if they get a chance, they will buy Bitcoin; as of now, it is worth looking at other options that are available at cheaper rates. These people have studied and understood the basic criteria for a cryptocurrency that will eventually go big in the future. But unfortunately, most ICOs or Initial Coin Offerings will remain in the market for long enough to make money and exit the market cheating the investors.
There are thousands of cryptocurrencies, some unique, some trying to improve the existing technology. They are published by the developers stating their vision and intent for developing the cryptocurrency. Such a report is called Whitepaper, where the details and technical data related to the crypto are mentioned. However, most people find it challenging to understand the Whitepaper, but it is quite understandable if you go through it carefully and do some research. However, there are quite a few fake cryptos that copy white paper from one crypto and publish it as their own. Thus if you understand a white paper, you can spot the fake ones and avoid being a potential fraud victim.
Is there a surge in cryptocurrency scams?
Unfortunately, yes. Such scams are ramparting and growing at an exponential rate. As per a report in November 2021, decentralized finance or DeFi users and investors have lost $10.5 billion to theft and fraud.
Although the experts agree that crypto-related crimes may be at an all-time high, there is no denying that there is a growth in legitimate cryptocurrency usage that far outstrips the growth of illegal usage.
In 2021 alone, the transactions involved in the illicit address were less than 0.15% of the total trade volume of $15.8 trillion.
It is possible to trace the illicit funds with the blockchain technology. For instance, cryptos used for transacting on the darknet or their traceability when they belong to a hack carried out on a crypto exchange.
However, the cryptocurrency ecosystem is growing at such a rate that slowly but surely, it is getting rid of such criminal activities.
Experts also give credit to the evolving toolkit of law enforcement to encourage crypto-based activities and the inherent transparency of the blockchain technology used by cryptocurrencies.
Are there any signs of avoiding being a victim of a potential cryptocurrency scam?
As a novice investor, you should look out for these red flags before considering any crypto exchange or a cryptocurrency.
- Promising big money: Avoid giving in to such promises even if they are endorsed or reviewed by a celebrity as they can be faked.
- Big payouts with huge guaranteed returns: The word “guaranteed” returns is a red flag.
- Free money: there is no such thing as “free” in this world. If you come across such adverts through email, text, or any other platform, avoid them.
- Big claims without details or explanation to support it: think twice before going ahead with such tall claims.
Some preventive measures to avoid being caught up in a cryptocurrency scam;
- Never go for a digital currency or a cryptocurrency if you do not understand its works. Even if you do invest, invest small; invest only what you can afford to lose.
- Never rely on anyone’s advice for investing or trading in a cryptocurrency. Carry out the trade or investments based on your research.
- Join a cryptocurrency community to know about the tech ideas and the working of the cryptocurrency which is actively discussed.
- Understand and follow the latest crypto news on social media platforms.
- Avoid falling for freebies on social media posts promoting giveaway cryptocurrencies.
- Avoid sharing your “private keys” that allow access to your digital currency with anyone. The safest place to store your digital currencies is on an offline wallet. Thus you are safe from an online hack.
Since cryptocurrency is gripping the world, evoking emotions like fear and greed, since the ecosystem of crypto continues to grow, many con artists will make the most of this situation. Therefore, the best way to prepare yourself before entering the crypto market is by educating yourself with all the knowledge you can. In fact, all the information is just a click away.
Understanding its working and the market for cryptocurrency is not that difficult.
Initially, you will need some time to get used to all the jargon and the abbreviations. But once you master these, you can even spread knowledge about cryptocurrencies.