How to Avoid Common Scams in the Crypto World
With thousands of cryptocurrencies and projects emerging every year, scams have become all too common in the unregulated crypto industry. Fortunately, being aware of common scam tactics can help you protect your investments. Here are some tips:
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Beware of Pump and Dump Schemes
In these scams, promoters artificially boost prices of low-value coins on social media to lure investors. Once a high price is achieved, the promoters sell their holdings, causing prices to crash again, leaving unwitting followers with losses. Be wary of new coins being heavily shilled online without solid fundamentals. Do your own research before buying into hype.
Watch Out for Fake Celebrity Endorsements
Scammers may create deepfake videos or fake Twitter accounts pretending to show famous people endorsing coin investments. Celebrities do not usually promote specific coins. Be wary of promotions that seem too good to be true. Verify info from official celebrity social media channels before acting.
Avoid Unverified “Insider” Tips
Some scams involve promoters claiming to have exclusive inside info, regulatory approvals or partnership announcements for pumps. There is usually no evidence to back these insider stories. Information spreads too quickly online to act on vague tips amid hype. Stick to reputable platforms for news.
Beware of “Too Good to be True” Returns
Promises of guaranteed high daily returns should be a red flag. No legitimate crypto investment provides risk-free profit. Offers involving multi-level-referral systems are also likely pyramid schemes. Reputable crypto lending or liquidity pools have reasonable, transparent risk-adjusted returns, not unbelievable gains.
Watch for Phishing Scams
Hackers may copy legitimate crypto websites or exchanges and add lookalike URLs to trick users into entering login details on fake sites. Ensure URLs are typed fully or use bookmarks. Enable two-factor authentication for additional security. Be wary of unsolicited messages with link shortened URLs as well.
Beware ICO/IDO Scams
Many initial coin offerings (ICOs) or initial dex offerings (IDOs) promoted online are outright scams. Check if projects have a real team, working products or third party security audits. Do not invest more than you can afford to lose in any early-stage crypto projects. Most fail to deliver what is promised.
Avoid Fake Crypto Wallets
Fake or phishing mobile apps or extensions may impersonate real crypto wallets but steal your funds. Download wallet software only from official sites and app stores. Never share recovery phrases or private keys with anyone. Crypto funds cannot be retrieved once lost to scams.
Watch Out for Fake Exchanges
Fake exchange websites, identities and social media profiles proliferate online. Only trade on properly licensed and regulated centralized exchanges after thorough research. Bookmark domains and always double check URLs to avoid clickjacking to fakes. Enable whitelisting for withdrawal addresses.
Beware Get-Rich-Quick Systems
As with any other field, the crypto space has its fair share of money-making schemes that promise wealth without work. Ignore things that sound too good to be true like risk-free automated trading bots or ways to “leverage” your coins and make huge returns overnight or weekly. Reliable investing takes time and diligence, without guarantees.
Stay Wary of Unverified Tips/Advice
Be skeptical of any advice or guidance from unverified or anonymous accounts. Do your own research to verify tips before acting on them or sending funds anywhere. Reputable experts publicize real names and credentials.
In conclusion, vigilance and caution are key to avoid crypto scams. Do thorough research, think critically and only invest amounts you can afford to lose in new crypto projects. Read beyond headlines and hope, as most genuine innovation happens gradually, not through overnight hype. With care and wisdom, the opportunities of cryptocurrency can be explored safely.
Nathaniel is a cryptocurrency blogger and investor. He has been blogging about cryptocurrencies since 2017 and considers himself an expert in the space. Nathaniel also invests in cryptocurrencies and believes that they will become more widely accepted as time goes on.
