Finances Tips

5 Common Cryptocurrency Scams All Traders Should Avoid – 2021 Guide

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Written by Quentin Hack

Scams are not a new occurrence. With the rapid increase in digitalization and services shifting to cyberspace, online scams are becoming the fresh target for money swindling and fraud. The crypto market has become the new hub of online scams.

One significant reason for cryptocurrency traders to be victims of such scams is the lack of salient knowledge and awareness of cryptocurrency trading. Another issue can be the association of cryptocurrency or Bitcoin to the dark web, making it more susceptible to scams.

Should you exercise caution while buying cryptocurrencies?

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Since it first gained prominence, cryptocurrency has held a place of curious interest in people’s perception due to its volatile nature. Cryptocurrency trading has been the source of numerous controversies and often for the wrong reasons.

At the outset, cryptocurrency trading seems to be an exciting and profitable trading and investing space, but it has its cons like any other trading platform. Cryptocurrency scams have been increasing, and according to reports, they have hit an all-time high in 2021.

Before one jumps into cryptocurrency trading, it is a good idea to familiarize yourself with the common variety of scams and understand the areas of the crypto coin market most exploited by scammers and hackers. Experts usually recommend that when you are trading with cryptocurrency operations, make sure that they are blockchain-powered. This means that they keep a record of your transaction data in detail.

You should also check that they have proper business plans that solve real problems. The company should chart out their digital currency liquidity rules and their other ICO rules which will help you to make your decision.

Choosing a brilliant platform will help you save yourself from scams and assist you in figuring out a safe cryptocurrency to invest in. Click here to know more about the intricacies involved in the industry.

Some prevalent cryptocurrency scams all traders should look out for are discussed below:

1. ICO Scams

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These scams usually involve the creation of fake ICOs. The counterfeit Initial Coin Offering (ICO) issue started around 2017 and still plagues the cryptocurrency market. 2017 saw the highest case of fake ICOs when they reached around 80% of the entire market. These fake websites ask users to deposit coins into a compromised wallet. In other cases, the ICO itself may be problematic.

Thus, this is also linked to an imposter or fake websites and mobile applications. One of the easiest ways to identify fake websites from the real ones is to check the lock icon near the URL bar, indicating security. If there is no “HTTPS” in the web address, it can also be a fake website.

Even if the site resembles the actual one, it can often direct you to imposter payment pages. Fake mobile apps are also a menace contributing to this problem.

2. Social Engineering Scams

These are slightly trickier as they involve manipulation by scammers to get information related to your user profiles. Phishing is a viral scam of this type. Spam emails, dubious websites, etc., which help these fraudsters get your personal information, are ways to target traders into scams.

Scammers are particularly interested in the private key of your crypto wallets, which is required to have access to your digital coins. Again, emails are used to get this data. Another way is to send blackmail emails threatening to expose fake adult websites visited by the user.

This is used to threaten the traders in exchange for private critical information. Traders should always check that the linked web address is encrypted (i.e., its URL starts with HTTPS). In general, visiting unverified websites should be avoided.

3. DeFi Rug Pulls

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These are the latest in the set of cryptocurrency scams to emerge in the market. This method focuses on decentralizing finance by withdrawing barriers to financial transactions. This method allows users to stake their cryptocurrencies to users and get maximum profits through interests.

But this has its issues. Fraudulent platforms lure investors into lending money by promising hefty profit, but it ends up in their own pockets, leaving the lenders scammed. These smartly crafted contracts freeze your funds for a specific period and then let the scammers steal them using their software.

4. Social Media Scams

Social media is the necessary evil of today’s time. With the increasing digitization of various services and our identities due to social media, all our information becomes readily available in cyberspace. It is not a surprise that scammers often target cryptocurrency traders using their social media profiles.

Creating fake social media accounts to solicit digital coins from followers or directly hacking popular Twitter accounts is a widespread social media scam. Apart from Twitter and Reddit other platforms like the video-sharing platform YouTube has also faced similar issues.

5. Scams Caused by Viruses and Malware

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Last but not least, these are the traditional scamming methods. Scammers often resort to the virus and malware scam option to gain access to your crypto wallets when all else fails. Two-factor authentication is one of the ways to protect yourself and your devices from viruses. Always ensure that the websites you visit are verified and never share your details.

Conclusion

Cryptocurrency trading can be a tremendous investing or exchange platform if used wisely and with caution. Scams are everywhere, but before venturing into any new thing, you should be aware of its pros and cons and understand various issues so that you don’t end up becoming a victim of such scams.

They can be easily avoided, and you need to be a bit vigilant. Traders should research adequately and in-depth to ensure that the platform or the broker or company they use is verified and credited and ensure that proper trading technicalities are being used.

Avoid clicking on dubious websites and never share your personal information unless to verified sources. Keep these common scams in mind to avoid getting entangled in them and have a hassle-free and safe and secure trading experience.

About the author

Quentin Hack