As the market develops the field of cryptocurrency attracts million of investors due to high potential returns and decenteralized nature of the financial processes. Nevertheless, with this growing market, it comes with cons in the sense that it attracts a lot of con artists who are out to dupe people.
It is quite essential that you learn how you can distinguish a crypto-shaming scam in order to secure your investment and financial resources. Our target is to provide you with as much information as well as the necessary tools in order for you to be able to identify these scams and avoid them.
Understanding cryptocurrency scams
What are cryptocurrency scams?
Cryptography based fraud is typified by schemes where the purpose of the con-artist is to defraud investment clients. There is a number of such scams including fake ICOs, Ponzi schemes, phishing, and pump & dump tricks.
Some scammers employ infallible strategies to make them believable and therefore researching should be a constant exercise. This paper presents the analysis of the current growing prevalence of cryptocurrency scams in the United States.
Cryptocurrency popularity has grown thus making scammers to also increase in the market. In the first quarter of 2021, the FTC revealed that cryptocurrency lost hit more than $80 million. It reveals how significant it is that the population knows about the typical binds and how they are orchestrated. Here are some types of cryptocurrency scams that many a people fall for, they are;
Scammers disguised as they launch ICOs
ICOs are quite common way that stocks keep start-ups funding launch through the sale of their own tokens. Still, using ICO as an opportunity to get money from gullible investors is not an instance of the use of this concept because scammers can open fake ICOs in order to get investments under the pretext of high profitability.
These are essentially fake ICOs which are in the business of disappearing as soon as they have financially enriched themselves.
Ponzi Schemes
Ponzi schemes popularly offer investors good profits with minimal risks by usually using new investors’ money to pay other investors. In the long run, such a scheme crumbles when there is no fresh meat to squeeze to finance the payments.
The warning signs you should be on the lookout for
Unrealistic Returns
Since, usually people prefer investments that yield high return, it is wise to remember that the higher the returns the higher the risk. White collar investments usually have moderate returns in the long run and on the other hand cons have hugely exaggerated returns with little risks involved.
Lack of Transparency
True projects within the field of cryptocurrencies are often open regarding their team, the technology that they use, and the objectives that they set. This requires, if a project is obscure or possesses scarce information, or has faceless developers, it may be a warning sign.
Pressure to Invest Quickly
Con artists have learnt the art of manipulating people into making quick investment related decisions by devising a culture of time sensitivity. As you go through a given opportunity be careful if it urges you to act immediately or tells that you might miss a one-time opportunity.
Unsolicited Offers
Avoid any offers that you get from people you do not know, through platforms such as social media, emails, or messaging applications. These outlets are often used by these scammers in their attempts to get at their potential targets.
Complex and Confusing Language
Fake busters can employ long and winding words in their con that is intended to defraud people. It should be noted that in case you have no clear understanding of how a certain investment instrument functions, it is better to stay away from it.
How to check the authenticity of the project – Cryptoсurrency project checklist
Research the Team
Look at the profile of the people employed in the team that will be working on the project. This means that, for such consultants, one should look for proof on their experience and background that they are capable of doing the job successfully.
Check for a Whitepaper
A credible crypto asset generally provides a whitepaper that defines a project’s technology, purpose, and the planned adoption method. Read the whitepaper critically to make sure that there is ample information whenever clients seek to get more services and that the whitepaper is well-written.
Analyze the Technology
They should gather information through various technological reviews and analyses from the trusted sources regarding the project. Check the practicality of technology and its reliability as well as ensure that there are no actual flaws, and no wonder solutions are being promoted.
Verify the Community
Proposals with proper ideas usually involve people who are always participating in the discussions. jump in to the relevant forums, social networks, communities and other similar resources in the internet to see how active the community is and how much support they have.
Look for Regulatory Compliance
Check whether the performances in the project adhere to different legal requirements. Thus, compliance with the requirements will add another level of protection and will show that the project is not a scam.
Source of Information on Scams and Related Products
Blockchain Explorers
There are few addresses with which you can check the histories of the transactions and the authenticity of the project. These should be used to look for anything shady or out of the norm.
Scam Reporting Websites
Some of the online resources that help to detect scams are the ones named by many users and tracking scams – CoinScam and BadBitcoin. These are the source to learn about the current scams and to check out whether the investment you are planning to make is authentic or not.
Online Communities and Forums
Participate in various forums dedicated to cryptocurrencies and related affairs to know what is going on in this sphere. These platforms can be useful and allow discerning the scams at least to some extent.
Social Media
Set up accounts on twitter or linked and start following established crypto analysts and influencers. These persons can forward vital information and alerts regarding various scams, for example.
Conclusion
This is the world of cryptocurrency and investing involves great potential and a great risk. In conclusion, it is vital to acknowledge the alerts and tools that help avoid the most frequent types of cryptocurrency scams in the United States to avoid becoming a victim.
It is therefore advisable always to do your homework, remain updated and secure your investment so you can enjoy a safe and fruitful time in the cryptocurrency market.