The trading of ICOs has also started in USA in the last few years. According to the so called high possible returns in cryptos and Call for a decentralized financial system many Americans have been attracted to get into the field of cryptos.
Yet, because of their exceptionally high variability, the popularity of the corresponding scams, and the overall lack of state supervision, this is quite literally a risky business.
Though, it is slightly useful in identifying what not to do where social setting structure and management is concerned. In more detail, this article takes attention to several relevant areas, or rather, areas that investors need to take more attention with regard to cryptocurrencies in USA.
Avoiding unregulated exchanges
In fact, focused on investing in cryptocurrencies, the primary, and possibly the most critical step is choosing the right exchange. Indeed, in today’s environment in the USA there are several trading platforms that are legally allowed to operate and as such they are the haves of security for investors.
However, not all exchanges are created equal and they all its features are not integrated in an exchange from the start of its establishment. Thus, it is quite insecure for example, one can fake or the website or the platform, which is being used for communication can also be fake.
The importance of regulation
BSE and NSE, the two regulated exchanges, need to meet some standards that are supposed to be investor’s fund protective. They are examined from time to time for audits, must formally establish sensible reserves and are generally insulated from certain kinds of risk.
As long as these exchanges were still present, the public had no mechanisms of ensuring that the exchange, for instance, is considering best practices as to securities to financial management hence suffering great losses or even encountering the exchange’s bankruptcy.
Red flags of unregulated exchanges
Emphasis should be made on signals that would refer to the point that the exchange is not regulated as intensely as it should be. These include:
- Lack of Transparency: Such forms of exchanges are most of the time associated with low levels of transparency most of the times. If you cannot find on an exchange’s site information that includes its team, geographical location, and whether it is regulated or not, then it is best not to use the exchange.
- High Yield Promises: If an exchange is giving very high returns it is very likely a scandal… Legal platforms do not mask related risks that are associated with the trading of cryprocurrencies.
- Poor Online Reputation: Conduct thorough and meaningful analysis of the users’ rating and testimonials. When one is to avoid an exchange, then he or she should not invest his or her funds in an exchange with many complaints and pending issues.
Steering clear of pump and dump schemes
Some of the cons encompassed in the market today include pump and dump specifically within the market for cryptocurrencies. Such schemes include making what can be regarded liberal fibs on a given digital currency so that people are convinced to invest in the currency in order for the makers of the scheme to invest in the same currency and sell their own at a higher price given the skyrocketing price of the digital currency in question.
How pump and dump schemes work
A few individuals will join forces and send a large amount of a particular type of digital token over an instant messaging platform – usually, this token will likely be one that possesses a lesser amount of market capitalization.
After that, manipulative and optimistic information about the existence of the coin shall be released in order to help in attracting more customers. Of course the new investors push up the price when it is their turn to buy the stocks, the initial investors sell theirs at a premium.
The aforesaid shares after they go for floating in the market drastically decline and those who are invested by paying these high-sounding prices get severe losses.
Recognizing and avoiding pump and dump schemes
To avoid falling victim to these schemes, investors should:To help investors refrain from falling prey to these scams, the following measures should be taken:
- Conduct Thorough Research: Anyone has to always make sure that they undertake research of the fundamentals of any given altcoin. The following fields need to be investigated: On the project of the team of developers, technologies to be used, and the prospects of the given market.
- Be Skeptical of Sudden Price Surges: Do not invest in any crypto currency that has a volatile characteristic and a sharp increase in it’s demand. These are more often exploited in Pump and Dump Scams More often, Arbuthnot’s (2011) Three Pillars of Pump and Dump Schemes are applied in cybercriminal activities targeting consumers.
- Use Reputable Sources: Do not consider the information disclosed in social networks as well as other third party sources to be fully reliable, yet use only official headlines of news, and estimations from the trustworthy financial experts.
Avoiding initial coin offering (ICO) scams
Among the trends, it is essential to notice that initial coin offering has been considered as the most effective source of funding for startups within the blockchain market. However, this sector has still not been as much regulated as it should and thus it can be seen that many scams appear in the ICO market.
The new traders have especially been in the List of those who have fallen prey to conQue in ICOs, which State that they are the innovators of new technologies only to disappear in thin air.
Understanding ICO scams
ICO scams mostly occur when there is a new crypt that presents solutions and massive earnings in the future. To implement these plans, an ICO is the project: investors are to buy the coin at a cheaper price than which it was to be sold on the market.
However, the moment the money has been collected the project is disappeared, and all that investors receive is a fake token. Summing up, investing is a process that can help someone earn more money by engaging himself/herself with cryptocurrencies, however, it has numerous risks that allow someone to lose a huge part of his/her money.
In other aspects, it is possible to avoid unwanted interactions with unaudited exchanges, pump and dumps, as well as ICO frauds and invest in cryptocurrencies in a relatively safer way. All that you need to remember is that nothing will assist you in the crypto market more than research and a pinch of scepticism.