Ready to make an investment but not sure if the coin you’re looking at is legit? Here are our tips on how to check for signs if a particular crypto could be a scam. Cryptocurrency is becoming more and more popular today. However, the volatile markets and the lack of related regulation in most countries make it a risky investment, albeit one that can pay off if done right.
The unregulated nature of cryptocurrency is a big reason why a lot of bad actors carry out a crypto scam. As research shows, people fall for such scams all over the world, and in 2021, they lost over $14bn to crypto scammers. Since this market is so unregulated, it’s next to impossible for them to get their money back. Even with the involvement of law enforcement, it’s rare that they can help return everything that you’ve lost.
So, the only way to prevent losing your money is for you to be cautious when making decisions to invest and learn to recognize a cryptocurrency scam. When taking such a decision, you should make sure that the currency on offer is legitimate and that the company that offers it is a real provider rather than a scammer.
Given the lack of regulation, it’s hard to verify whether a cryptocurrency unit is a legitimate one. So, if you’re offered to invest in a specific coin, take your time to research it. Ask yourself these questions:
Sometimes, scammers would use fake company websites with domains closely resembling real ones like Coinbase. Such sites would request your crypto wallet’s password and financial information or unexpectedly shut down when you try to withdraw.
So, before deciding to use a website of a specific company, make sure to:
Even when a website does turn out to be a genuine crypto trading platform, make sure that any decisions you make are thought through. Don’t invest until you understand exactly what’s going on – look up any terms you don’t understand and, ideally, get professional advice. Also, make sure you read the agreement/Ts&Cs with the platform. If they don’t accept responsibility in cases of your money being stolen, think twice.
Here are some more tell-tale signs and examples of scams.
There are influencers like Elon Musk that promote cryptocurrency. And if you’ve gotten into crypto thanks to his Dogecoin endorsement and it paid off for you, that’s excellent.
However, the success of influencers, including celebrities with a large social media presence, means that scammers can also capitalize on it.
For instance, if you’re a fan of Elon Musk who tweets about him and suddenly get a direct message from someone claiming to be him, be skeptical and don’t engage. Here’s how you can tell that it’s a scam:
That’s not to say, however, that there isn’t room for being inspired by celebrities’ enthusiasm for crypto investments. However, it’s important to be cautious and remember that celebrities are people too and might not be investment experts. Basically, treat any crypto-related advice from celebrities and influencers the same way you treat any other product’s endorsement by them – trust, but verify.
The clickbait emails and ads with titles like “BITCOIN GIVEAWAY!” or “X celebrity selling off crypto assets NOW!” are designed to make people anxious and excited. However, they often sound too good to be true – and that’s the principle you should follow. If an ad, an email, or a Telegram message sound too good to be true, they probably are. Here’s what you can do to protect yourself in these cases:
Investments and dating just don’t mix. Despite some people acting to the contrary, there are reasons why LinkedIn isn’t used for hooking up, and VCs don’t discuss pre-seed investments on Tinder.
So, if someone on a dating site offers to discuss “a huge investment opportunity” or a way to get rich quickly or asks you to download an app that looks suspicious – a phenomenon known as CryptoRom – you’re likely being catfished. Block this person immediately.
This type of catfishing isn’t restricted to dating sites, of course – if you’ve met someone like on social media, they’re probably scouring it for that very purpose. These people are very good at social engineering, whatever platform they’re using, and sometimes the scheme looks very legitimate, including real “customer support” people. In the first few months of 2021, the FBI fielded over 1,500 CryptoRom scams reports – so be careful in your online relationships.
A crypto scam can also be done differently to make it look legit on social media. You should pay attention to shills, who are paid social media users who simply try to hype a particular coin with fake profit updates even if they never invested themselves. Beyond that, be wary of things like “airdrops.” Nothing is free in life, and you should be careful about any such offerings. Why would anyone give away money, even if it’s in a trendy currency?
Generally, the best ways to tell that a cryptocurrency investment offer is a scam are:
If you’re interested in even more info about how to verify if any particular new cryptocurrency or coin is legit or might be a crypto scam, you can also watch the featured video below by Game Thinking TV with Amy Jo Kim, Amy Wu, Holly Liu, Beryl Li, and Libby Schultz. Stay safe and make good investment decisions always!
YouTube: How do you know if a crypto project is legit or a crypto scam?
Photo credit: The feature image has been taken by Shotprime Studio. The photo showing the man on a couch was prepared by Bullrun. The screenshot of the Google search results was taken by the author for TechAcute.
Source: Chainalysis / John Biggs (Coindesk) / Kevin Peachey (BBC) / Wikipedia / NDTV Business Desk / Sophie Alexander, Misyrlena Egkolfopoulou (Bloomberg) / Alexander Martin (Sky News) / Coinbase / Katie Fiore (FastCompany) / Jagadeesh Chandraiah (SophosLabs) / Jeremy B. Merrill, Steven Zeitchik (The Washington Post) / Jazmin Goodwin (CNN Business) / AARP
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