Thanks to the opportunities offered by the cryptocurrency market to make money, and the low barriers to access to it, its popularity is growing more and more. Not only expert traders but also beginners are entering into the market. As any other kind of market, it has some risks you have to keep in mind, either you are expert or not, and with risks I am not talking about the volatility of the market, but I am talking about the scammers.
In this article I am going to outline the most common scams you could meet in the cryptocurrency market and I am going to suggest you some ways to avoid falling victim of them.
1.PHISHING
With the term phishing it is described the attempt done by hackers to steal the user’s data, including login credentials and credit card numbers. It occurs when an attacker, masquerading as a trusted entity, dupes a victim into opening an email, instant message, or text message.
Scamming e-mails, fake website and fake mobile apps are strategies that belong to the phishing.
In particular, scamming e-mails are mails that apparently comes from a trusted institution. In the e-mail it is asked to reveal confidential information, in this way the attacker can access to the wallet of the user and steal its money. One way to avoid this scam is by paying close attention to the e-mail address, checking if there are misspelling in it. Most of time, phishing e-mail address is very similar to the original address they intend to imitate, but not completely the same.
Fake mobile app and website have the same aim as scamming e-mail: get access to your personal information. Regarding the mobile apps we have to keep in mind that in the play store and in the apple store there are many app that allow us to trade cryptocurrency, however some of them are fake. Before choosing which one we want to download, it is better to look at the ranking and at the reviews, but it would be better to check a little bit deeper, doing some online researches. Regarding the fakewebsites we should consider that there are some websites that have been built to look exactly like the official ones. To make sure that we are on the official website we should make sure that there is the lock icon at the left bar where is written the address of the website. Moreover, we suggest avoiding clicking on links got by email, messages etc. because they could lead you to a fake website.
2.PONZI AND PYRAMID SCHEMES
Ponzi scheme and Pyramid scheme based around the same concept: unsuspecting individuals get fooled by unscrupulous investors who promise them extraordinary returns in exchange for their money. However, in contrast to a regular investment, these types of schemes can offer consistent profits only as long as the number of investors continues to increase. Once the number tapers off, so does the money.
Ponzi and pyramid schemes are self-sustaining as long as cash outflows can be matched by monetary inflows. The basic differences arise in the type of products that schemers offer their clients and the structure of the two ploys, but both can be devastating if broken down.
With Ponzi schemes, investors give money to a portfolio manager. Then, when they want their money back, they are paid out with the incoming funds contributed by later investors. (https://www.investopedia.com/ask/answers/09/ponzi-vs-pyramid.asp)
With a pyramid scheme, the initial schemer recruits other investors who in turn recruit other investors and so on. Late-joining investors pay the person who recruited them for the right to participate or perhaps sell a certain product. (https://www.investopedia.com/ask/answers/09/ponzi-vs-pyramid.asp)
3.IOC SCAMS
The term ICO stands for Initial Coin Offerings and it is one of the methods that crypto startups use to finance their projects. The problem is that anyone can launch an ICO because it is not too difficult to create a new cryptocurrency token. This gives to the scammer the opportunity to get money from investors by creating a token, advertising it and promising great outcomes. When the price of the coin reaches its maximum, the scammer will sell the majority of the coins and ditch the project. When you consider investing in an ICO you should do researches on the project and read the whitepaper to understand if the project is valid or not.
4.SOCIAL MEDIA GIFTS
On this point you have to keep in mind that no one gives Bitcoin or any other cryptocurrency for free. The scammer sometimes gets the access of a Twitter verified account and he or she changes the name to be someone famous and trustworthy, for example Elon Musk. At that point the scammer will post something like this:
“It is my birthday and I am giving away 1 Bitcoin to anyone who sends 0.001 Bitcoin to this wallet address.”
The post will be shared to get the maximum spreading on the internet. A good way to avoid this scam is by looking not only at the Twitter name, but also at the name following the @ (as you can see in the picture above).
To avoid being involved in these (and other) scams, you should always do your own researches and also you should not believe everything you read. If something sounds too good to be true, probably it is!
