Contemporary times have witnessed the launch of a number of projects following the growth, huge demand, and profitability of cryptocurrency projects. Associated with this trend is a seemingly proportional increase in the rise of crypto scam projects. With the mainstreaming of cryptocurrency, there is a sense of responsibility that comes with trading in a high-risk investment market. As such, both investors and non-investors are targets for scammers aiming to earn quick money by manipulating people who will do anything to get rich quickly.
One of the most famous scams was BitConnect. The project that turned out to be a financial pyramid collected billions of dollars from investors and left them with an unuseful coin. The referral program proposed by the BitConnect providers no longer exists, but the cryptocurrency space is still full of such schemes. In this article, we’ve highlighted some pointers to crypto scams so you can easily spot them and avoid falling victim.
First off, a simple approach to evaluate whether or not a token is a fraud is to look for investment schemes that promise unreasonable returns in a short period of time. Authentic crypto projects take time to build up products and solid investment policies via their tokenomics structure. A careful study of this aspect is an important precedent to identifying crypto scam projects.
Again, any crypto giveaway scheme which requests investors to send a few coins for address confirmation is almost certainly a scam. Remember that no legitimate crypto project will ever ask you to send money first.
Another popular scam is Pump and dump, a fraudulent scheme conducted by small, well-organized groups looking to generate interest in unknown coins. They purchase the coins themselves before launching a social media campaign to generate interest in the project and attract investors. In this regard, as more people desire to take advantage of an investment opportunity, prices increase dramatically, causing FOMO (fear of missing out). The project’s organizers dump their coins as soon as the fear hits its peak, causing the project to fail and a major outflow of investors who realize they are losing money.
The obvious way to avoid this scam is not going into mass hysteria and again, don’t forget to study the market carefully. Commonly perpetrated scams also involve unsolicited job offers sent to actively lure cryptocurrency investors, trade cryptocurrency, create a cryptocurrency, or convert cash to Bitcoin.
Another method is to use hacked or forged social media handles of well-known individuals to promise quick cryptocurrency doubling. You may most likely send a certain amount of coins to a specific address or provide personal information. Just keep in mind that it’s always a scam.
As an investor or an intending investor, it is very important to invest after doing due diligence on a project. Look up their white papers, the background of the team behind the project, their social media handles, and check out the project’s community. Similarly, confirm that the token is supported by a real, working blockchain that you and anyone else can monitor in real-time. One must also ascertain that its developers are regularly introducing new features, fixing bugs, and attempting to improve the performance of the network.
In all, learn everything you can about cryptocurrency and maintain your uncertainty, and you’ll have a much higher chance of catching scammers off guard.
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