Top 5 Most Common Bitcoin & Cryptocurrency Scams in 2018
Cryptocurrencies have become a bit of hot cake. On one hand, lots of people are getting in and making a lot of money. Others are getting burned and losing their life savings in a bid to play in the markets and make a killing.
Most of those who do often invest in cryptos known as scam coins. These cryptocurrencies are designed to rip off people, and solely benefit their creators.
But because most newbies have no idea of how to identify the real moneymakers from the scams, many get burned, losing a lot of money in the process. This article is contains information on the more common cryptocurrency scams, show you how to identify them, and more importantly, teach you how to protect yourself, so you don’t get ripped off.
Types Of Cryptocurrency Scams
1. Cloud Mining Pools
Please understand that there are some legitimate cloud mining services out there. So, not all of them are bad. That said, this is one of the more common ways people lose their money.
These companies attract people who want to go into cryptocurrency mining, but have neither the time nor the money to buy and maintain their own cryptocurrency miners. So, these companies offer to help them mine, in exchange for a fee and a promise of the profits.
To identify the legit operations from the fraudulent ones, look for their registrants, company team lead and location. A major red flag is if you cannot find direct details when you do a whois lookup of their domain name.
But that alone isn’t enough. Look for transparency in terms of who runs what. Legitimate cloud mining services will have either their whois details available and/or information on the team managing the service.
Also be wary of companies registered in the US or UK, but with all team members resident abroad. If you cannot find a local address that’s verifiable, you might want to keep your money as that’s another red flag.
2. MLM Cryptocurrency Organizations
These are popping up all over the place and promising to make people instant millionaires. All participants have to do is get more people on board to invest in a specific cryptocurrency or a proxy project and they’ll profit from it.
The reality is that while there are legit multilevel marketing schemes, many of these crypto based MLM programs have no tangible product or service to sell. If the only thing they’re selling is a pyramid scheme, run and don’t look back.
3. Bogus Initial Coin Offerings (ICOs)
More and more people are realizing that they can make a lot of money from initial coin offerings. These people are taking advantage of the unregulated nature of the crypto space and the ease of creating tokens to launch ICOs.
In fact, it is estimated that over $1 billion has been invested in ICOs in the last 6-12 months, with many being unrealistic or downright fraudulent.
Unfortunately, many of these scammers are becoming more savvy and cleaning up their act by presenting a legitimate front –often with roadmaps, white papers, detailed information about their “projects” and other trappings that make their campaigns look legit. So, while it’s getting more difficult to spot the fake ICOs, it’s not impossible.
For starters, research thee company itself. If it’s been in business and has a good reputation, then you have a winner. If it’s new, has no reputation, and isn’t transparent about its processes, team or location, close that tab and keep looking.
Also, look at their management team and research them. Always go for those with well known and reputable team members. And if their promise or project sounds too good to be true, chances are it is.
4. Crypto Investment Packages
These are primarily bitcoin based and more formally known as bitcoin investment packages (BIPs). These are similar to cloud mining in the sense that they promise daily returns which are usually smaller percentages of your investment.
They often start out well to gain your trust, and then one day, disappear. This is another pyramid scheme designed to fleece you of your hard earned money. Users tend to fall for it by reinvesting their funds only to have their returns and payments gradually slow down and stop coming in altogether.
For these packages, we’ll say just walk away completely. And if you want to do this, just understand that it’s a short term Ponzi scheme and go in with your eyes open. For best results, get in at the very early stage, make your money, and cash out.
5. Pump and Dumps
These are projects created by individuals or consortium's for the sole purpose of driving the price wall up, and then cashing out once it reaches a predetermined price.
When you see cryptocurrency prices going up for no reason whatsoever, know that it’s a pump and dump in the making. If you want to partake, just make sure to get in early, enjoy the ride and cash out quickly. However, we don’t recommend investing in schemes like this at all.
There are communities that are solely dedicated to this. The go in and buy huge quantities of a certain cryptocurrency, watch the price artificially inflated and others get on board, then dump the coins after making a lot of money.
How To Protect Yourself From These Cryptocurrency Scams
There’s one simple thing to look for, and that is the use of cryptocurrency. Always lookout for the following when looking to invest in a cryptocurrency:
- An active community
- A development team dedicated to the project
- Transparency from the company
- Valid viable use case that solves actual problems
Always research a cryptocurrency before investing in it. A simple search string like “[intended cryptocurrency] daily reddit” will be enough to show if they are legit or not. Also look for mentions in major news outlets, visible team leads with a track record of results in and/or outside the industry and backers.