In a previous article, we talked about avoiding tech support scams. If you own a computer, you’re liable to be a target of those scammers. But that’s just the tip of the proverbial online scam iceberg.
Today, we’ll look at a new type of scam, targeting traders looking to cash in on the new bitcoin craze.
The world of crypto trading has opened up new opportunities for us traders. However, where there are opportunities, there are dangers.
Cryptocurrency markets are not regulated. Everyone is trying to find the next big deal. So it’s a great place for scammers to take advantage of people.
You can avoid most of the dishonest cryptocurrency schemes with common sense. But the more sophisticated scams are trickier to spot unless you know what to look for.
To get you started, here are the two most prominent bitcoin scams you might run into as a cryptocurrency trader. In a future article, I’ll prepare you to spot four more.
Fake Exchanges and Wallets
For any bitcoin trader, exchanges and wallets are essential. You might be storing your wallets on your mobile phone or your trading computer. And you might be using multiple exchanges to trade bitcoins and other cryptocurrencies.
The number of exchanges and wallets have grown exponentially over the last few years. Scammers are taking advantage of this growth and setting up fake services.
If you sign up for these fake services, the scammers can harm you in multiple ways.
- They might charge you non-refundable high fees.
- They might get access to your legitimate wallets on your trading computer and steal your bitcoins.
- They might use your financial information to run other frauds.
Last year, Ukraine’s Cyberpolice busted six fake crypto exchanges. That’s just in one country. Imagine the number of fake exchanges all around the world.
How to Protect Yourself
Here are a few ways to avoid fake exchange or wallet scams:
- Only use reputable exchanges.
- Don’t assume that an exchange or wallet is valid just because it’s on Apple App Store or Google Play.
- Use reliable crypto news sites (such as those referenced in this article) to research possible fraudulent services.
Fake Initial Coin Offerings
Initial Coin Offerings (ICOs) have been a novel way for the cryptocurrency industry to raise funds (similar to stock IPOs). They have created new opportunities for investors and traders.
But the profitability of bitcoin and cryptocurrency trading has given rise to fake ICOs. Scammers use upscale marketing and legitimate-looking technical promises to convince you of fraudulent investment opportunities.
Just as for IPOs, when you are sitting at your trading computer watching the rising value of an ICO, it’s tempting to get in on the action. But remember, unlike IPOs, ICOs are poorly regulated.
However, a study found that 80% of ICOs offered in 2017 were some form of fraud. That’s a really high number!
So, before you press that Transfer Funds button on your trading laptop, make sure you are minimizing your risk.
How to Protect Yourself
Before you invest in an ICO, be sure you’ve done your homework:
- Any form of investment comes with risks. So make sure you study and understand the underlying business before investing.
- Read the white paper to understand the roadmap of the ICO.
- Research the people involved in the project. Reputable people avoid fake ICOs because they want to be in the crypto industry for the long-term.
- Check multiple online forums and cross-check information.
As traders, we tend to get caught up in dreams of the big win. Don’t let that dream blind you to the truth behind the empty promises of bitcoin scammers.
We hope today’s Quick Tip helped you. If you found this helpful, you’ll want to check out the other computer How-To’s I’ve created on this page. You can always call us if you have questions: 800-387-5250.
Photo by Thought Catalog on Unsplash.