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If you are following regularly my posts about the crypto currencies you will notice that in almost all of them I am suggesting you how to stay safe, how to protect yourself from scams, how to make some research before starting investing etc. This is not only just because I want to sound smart, or to attract more audience to my blog. Ofcourse I would love my blog to get more audience, and who wouldn’t. But the thing that I am talking about safety, is that I see every day more and more scams coming out. A lot of new companies, new coins are arising almost on a daily basis. I can not even keep up with them. I see every day people advertising companies, advertising coins that look like scams. Remember, that a real marketer will never ever fill up his facebook page or Instagram with thousands of advertises about a certain opportunity. Even if it’s the biggest opportunity. Maybe they don’t know that they are involved in some kind of a scam. And they’ve been tout to do it like that. Safety is your primary thing. Hey, at the end even I can get scammed, no matter what safety precautions I am making. It can happen to any of us.
I will start this blog with a quote from the famous Sir Richard Branson, founder of Virgin Galactic, and 400+ businesses.
‘’Well, I think it is working. There may be other currencies like it that may be even better. But in the meantime, there’s a big industry around Bitcoin. People have made fortunes off Bitcoin, some have lost money. It is volatile, but people make money off volatility too.’’
‘’Virgin Galactic is a bold entrepreneurial technology. It’s driving a revolution. AndBitcoin is doing just the same when it comes to inventing a new currency.’’ (Source:CNBC)
So how do you avoid cryptocurrency scams? The easiest way is just to stay at home and don’t play with your hard-earned cash. But if you are determined to invest in the cryptocurrencies, there are some common scams that you should be aware of.
Let’s have a look at them:
- Shady Exchanges
As the Bitcoin and other altcoins exploded in popularity, there’s been a huge rise in cryptocurrency exchanges. All of them want your attention, and the transaction fees that come with handling your purchases. Very often on the Social Media you will see links that are saying some things like: Buy Bitcoin for 7% under market value. Save big! This and other similar examples are nothing but marketing trick to get your attention and to visit their fake exchanges. If you have read my previous post the first thing that I mention is to resist to FOMO (Fear of missing out) or any other HYPE.
If you visit some of this websites the first thing you want to do is make sure it’s HTTPS and not HTTP. This means that the web traffic is encrypted and secured, if it’s just HTTP it is a big red flag and means stay away.
Another red flag to look for are exchanges that offer selling Bitcoin for PayPal. Here you will see a web form to enter your PayPal email and amount to sell. After submitting, you will be presented with a QR code to send your bitcoin to. But the money never arrives.
The point is that it is very difficult to trust people in the digital world, especially if you cannot audit or verify what is taking place behind the scenes. Check out my blog about Cryptocurrency exchanges and you will find some of the exchanges that you can invest with.
- Pyramid and Ponzi Schemes
In the spring of 2017, a Mumbai-based company called OneCoin was delivering a sales pitch to a room of investors. Indian financial enforcement officers raided the meeting, ultimately jailing 18 OneCoin representatives for operating a cryptocurrency Ponzi scheme. At the time of their arrest, OneCoin had already moved over $350 million through a payment processor.
Ponzi sites may be harder to spot, but they are easy to figure out once you understand this: the only way to double your money is to first send it to them. A lot of people lost a lot of money. Unfortunately, cryptocurrency is creating new scams, using jargon and technology that most of the people have never heard of. Be careful.
- Cloud mining scams
This is a little bit tricky, because not all cloud mining operations are scams. Many of them are legitimate, but many of them are scams as well. Cloud mining is shared mining hash power, where people are joining together their funds to rent bitcoin mining machines. If the operation is legitimate, this type of mining is working really well and can be profitable. Some of the red flags that you can look for are:
Does the site use HTTPS? Did you find the site from a referral link on social media? Does the cloud mining operation not give any insights into what pool they use to mine, or let you select the pool you want to direct your hashrate to? These are just a few things to look out.
Initial Coin Offerings (ICOs) are the IPOs Initial Public Offering of the cryptocurrency world. Cryptocurrency startups create initial coin offerings to raise substantial amounts of money . However many of them vastly overestimate the value of their startup. The others are simply a pump and dump schemes. Due to the market hysteria around ICOs, and the potential for large short-time profits, many scammers are attempting to profit. The companies announce their ICO before the technology is truly ready. That way they can collect enough money to finish and start the project.
- Non existing coins
In August, 2017, the London Police shut down a cryptocurrency business that was cold-calling people to sell fake digital currency. The victims were cold-called and persuaded to purchase non-existing cryptocurrency. Nine people came forward to the UK firm, action fraud with combined losses over 150,000 pounds. Real investors will never cold-call you to offer opportunity, cryptocurrency.If you receive any type of this call, note the name of the caller, the company name and address, and hang up the phone. Your next call should be to report this company.
A growing threat comes from the social media. Prominent cryptocurrency company accounts are being impersonated on Twitter and Facebook. These scam pages, directly contact individuals, asking for investment in their projects, offering you discounted coins, or asking you to send them certain amount of coins and they will double it for you. Do not fall for this kind of scams.
So, are the cryptocurrencies bad? No, far from it. The growing technology is always attracting unethical, immoral individuals who will try to fool you. They key to staying safe in cryptocurrency is research. There are always people that will be scammed. Nowadays we have so much information about everything. Don’t be lazy to make some research on the internet about certain coin or opportunity. Ask someone who you know is already involved in any of the cryptocurrencies. Look for red flags. Especially do not trust the people who are offering you big returns in a short period of time. These are 100% scams. There is nothing like that as fast money. Maybe, if you win the lottery.
Until the next post
If you are ready to invest – start small and only invest what you can afford to lose.
Thank you for reading
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