Bitcoin Trader Scams - Best Practices to Avoid Them
Cryptocurrency investors are being targeted by an increasing number of Bitcoin trader scams. Bitcoin, a decentralised digital currency, was introduced to the market in 2009 by a mystery developer named Satoshi Nakamoto.
It was created to act as a virtual coin and a form of payment beyond the authority of any individual, group, or entity, thus terminating the necessity for third-party involvement in monetary transactions.
It is rewarded to blockchain miners for the work done to demonstrate trades and can be bought on multiple exchanges. Currently, it is the leading cryptocurrency in the market. Its popularity has resulted in the development of multiple other cryptocurrencies. There are, at present, 21 million Bitcoins in the market.
Tricksters are always waiting for a chance to steal investors' money. The massive popularity of Bitcoin and the technological advancement in recent years resulted in numerous Bitcoin trader scams. According to blockchain data firm Chainalysis, cryptocurrency scams had a record-breaking year in 2021 – scammers stole $14 billion of crypto last year. Investors interested in Bitcoin must know how to recognise these ongoing crypto scams and the best practices to avoid them and save their money.
How to Recognise Bitcoin Scams?
Caution signs to look out for include:
- Assurances of guaranteed returns: Bitcoin is a volatile investment. It has its ups and downs in the market. No monetary investment can assure future returns because investments can go down and up. Any Bitcoin offer that guarantees you future returns is a big red flag.
- Free money: Free money is a scam. Free money is a myth, any investment opportunity, be it cash or digital coin promising free money, is likely to be fake. Any individual or company asking you to invest in Bitcoin and enjoy free money return is scamming you.
- Exaggerated marketing: All enterprises advertise themselves. But one way that crypto scammers lure people is by investing in a hefty marketing strategy. This could include online advertising, paid influencers, and offline promotion. This is planned to reach as many individuals as possible to raise finances fast in the shortest time feasible. If the crypto offering marketing feels heavy-handed or drives grand claims without backing them up, break and do detailed research to save yourself from such a scam.
- Bitcoin craze: Bitcoin rose dramatically in value because genuine investors consider it a promising investment to buy at the right time, hold, and sell when the market is high. Always avoid "investment opportunities" that promise you a good return and ask you to invest in Bitcoin for Bitcoin's sake.
5 Common Cryptocurrency Scams
Cryptocurrency has evolved as a hunting ground for scammers. Let's dive into some common cryptocurrency scams.
- Fake websites
Fraudsters create phony cryptocurrency trading platforms or fake interpretations of authorised crypto wallets to scam gullible investors. These fake websites generally have similar, but slightly distinct domain titles from the sites they try to emulate. They look identical to legal sites, making it hard to differentiate. Fake crypto sites usually function in one of two ways: • As phishing pages - All the data you share, such as your crypto wallet's password, recovery phrase, and other monetary data, end up in the tricksters' hands.
• As straightforward theft - Initially, the site may allow you to withdraw a small number of funds. As your investments function well, you tend to invest more money in the site. However, the site closes down or rejects the request when you want to withdraw your money later. 2. Pump and Dump Scams
This scam sees a specific coin or token being promoted by scammers via an email blast or social media such as Twitter, Facebook, or Telegram. Traders often fall prey to such schemes and rush to buy the coins promising huge returns in a short time. Having thrived in raising the price, the tricksters then trade their holdings, resulting in a crash as the investment's value sharply falls. This can occur within minutes.
- Phishing Scams
Crypto phishing scams usually target data related to online wallets. Fraudsters target crypto wallet private keys, which are needed to access coins within the wallet. Their working method is similar to other phishing attempts and connected to the fake websites explained above. They send an email to draw gullible investors to a specially designed website asking them to enter personal critical data. Once the scammers have received this data, they steal the cryptocurrency in those wallets.
- Blackmail and Extortion Scams
Another trick crypto fraudsters use is blackmailing. They send emails that proclaim a history of adult websites accessed by the user and threaten to reveal them unless they share private keys or send cryptocurrency to the scammer.
- Scheming Initial Coin Offerings (ICOs)
An ICO is a mode for start-up crypto firms to raise funds from future customers. Usually, users are guaranteed a discount on the new crypto coins in trade for sending popular active cryptocurrencies like Bitcoin.
10 Best Practices to Avoid Bitcoin Trader Scams
Many crypto scams are sophisticated and influential. Here are measures to save yourself from such situations.
- Don't believe in celebrity-backed offers: One of the significant crypto scam trends includes fake celebrity-backed offers. BBC TV show Dragons' Den was one of them. The scam involved people going crazy behind Bitcoin investments because it was presented as celebrities supporting Bitcoin. But it was fake and was a trick used by fraudsters to steal investors' money.
- Protect your wallet: To invest in Bitcoin, you require a wallet with confidential keys. If a company requests you share your keys to partake in an investment chance, it's highly likely to result in a scam. Make sure you don't share your wallet keys with strangers.
- Keep a watch on your wallet app: In the initial stage of transferring money, make sure first to check the legality of a crypto wallet app. Do it by performing a small test of sending a small amount first. If, while updating a wallet app, you detect questionable behaviour, close the update, and uninstall the app instantly.
- Take your time: Fraudsters often use high-pressure techniques to pressure you to invest your funds fast – for example, by assuring rewards or discounts if you partake instantly. Take your time and conduct your own analysis before financing any money in Bitcoin.
- Be cautious of social platform adverts: Crypto fraudsters often use social platforms to boost fraudulent tactics. They may use unauthorised pictures of superstars or high-profile business individuals to build a sense of legality or guarantee giveaways or free cash. Beware of such tactics and don't fall prey to such scams promoted on social media.
- Avoid cold calls: If a person suddenly contacts you to tell you about a crypto investment opportunity, immediately cut the call, block the number and inform the police. Never reveal personal data or transfer money to a person who reaches you in this way.
- Do your research: If you are new to Bitcoin investments, it's good to conduct thorough research about the digital coin before investing your funds. Look if there is a whitepaper you can read, find out who handles it and how it functions, and scrutinise for honest reviews and testimonials.
- Examine Links: Before downloading any document or accessing any links online, examine the website to ensure it is trustworthy and is SSL-certified. With technological advancements, scams related to fake websites are increasing, so it's good to avoid landing on unsecured websites.
- Companies too good to be true: Businesses that promise assured returns or overnight riches are scams. These companies have their chain set up to lure investors into investing in their fraud schemes by attracting them with positive Bitcoin returns.
- Only install apps from authorised platforms: Although phony apps can end up in the Google Play Store or Apple App Store, installing apps from these mediums is more secure than elsewhere.
Bitcoin is the most popular crypto coin in the market. With its popularity comes a high possibility of fraud. Crypto fraudsters tend to sell the information they have collected to other scammers. So, investors must scrutinise before investing funds and update their usernames and passwords across the board to avert further damage. Remember, keep your wallet key private, double-check every URL, and if something appears too good to be true, avoid it as it will probably be a scam.
Finally, as with any investment opportunity, never invest money you can't afford to lose. Even if you're not being scammed, cryptocurrency is volatile and speculative, so it's critical to comprehend the stakes.
Author: Priya Kumari
Priya is a passionate content writer and the co-founder of Finendorse. She is an enthusiastic crypto investor and has a huge interest in the upcoming digitisation age.