cryptocurrency scamThe bulls are back, and hopefully, back to stay! Bitcoin’s price went over the $8,000 mark at the time of writing, a gain of over 33 percent in about one week, according to CoinMarketCap. Other cryptocurrencies have also followed suit with Ethereum gaining 8.29 percent to $203.62, XRP gaining 5.9 percent to trade at $0.3297 and Litecoin gaining 5.8 percent to trade at $90.47.
The resurgence of the crypto bull market is undeniable exciting and mixed with the Fear of Missing out (FOMO), there is likely to be an upsurge of new comers joining cryptosphere. The big crowd could however, include several bad characters. With so many potential investors willing to splash their money towards the most speculative and cryptocurrencies, the factors will combined whet scammers’ appetites.
Any prudent cryptocurrency investor out to make a return on the huge number of investment opportunities without muddying their boots from sketchy coins faces a herculean task.
Do your homework
Cryptoshpere has become the scammers hunting field, no matter how genuine it sounds, exercise caution to avoid getting swindled. Thousands of new cryptocurrencies have entered the market over the past few years; just because a digital currency appears in the coin market isn’t a guarantee that it is genuine. That is a more solid reason you must do your homework before plunging in with both feet.
The technology behind cryptocurrencies is so dynamic that even gurus have a hard time keeping up with emerging trends and terminologies. While we can’t guarantee that any Blockchain or cryptocurrency project will be authentic or successful, we are confident enough to outline steps that will help you smell a scam from a distance and keep a safe distance.
Like Teenage Love-Fast and Furious
Every time a “Bitcoin Evangelist” gives expert advice that sounds too good to be true, “invest in XYZ cryptocurrency and become a millionaire overnight,” it’s time to STOP, RAISE YOUR ANTENNA and RE-CONSIDER.
When you’re just on the verge of stepping out of the sidelines and taking a dive into the deep end, you want to remember that for the layperson, crypto space is like teenage love: exhilarating, fast, furious but dangerous, since it’s a venture into an exciting unknown.
Take note that the crypto market is exploding and filled with scammers with voracious appetites and schemes that are more refined than your regular Ponzi scheme. Before you invest in any crypto project, explore the following RED FLAGS to help you weed out scams:
1. Cryptocurrencies with Only an Internal Exchange
You can exchange any genuine digital currency into a fiat or local currency. Leading cryptocoins like Bitcoin and Ethereum have local exchanges where you can convert them into local currencies.
If someone designs a cryptocoin such that you can only exchange it internally, within its particular “community,” chances are high that such a community is Ponzi scheme and should raise a red flag. Genuine digital currencies are not only traded internally and can easily be converted to FIAT currency by most local exchanges.
2. A Cryptocurrency that’s Always Appreciating in Value
Be terrified whenever you encounter a cryptocoin that’s only appreciating as someone is most likely trying to find their way into your pocket; what you have is most surely a scam coin. It’s an open secret that currencies, whether fiat or digital, have a level of volatility; their value will go up and down depending on market factors.
Scammers are good students of human psychology and know that you love making profits. To “satisfy” your natural greed they create coins whose value appreciates daily knowing they will have disciples. Genuine coins are subject to forces of supply and demand to determine if, how and when their value appreciates or depreciates.
3. A Cryptocurrency without Solid Background Information
Another warning signal to watch out for is the lack of solid background information about the digital coin. If a cryptocurrency hides or does not share openly its basic information such as the name and address of its owners and where they are located, you have all the reasons to believe it is a scam coin.
It’s always prudent that you carry out your own solid research about any cryptocoin that you plan to invest in before taking the first step. If for any reason that coin doesn’t publish its background information, you are looking at a scam coin.
4. A Cryptocurrency That Promises an Automatic and Regular ROI
The promise of an automatic and regular return on investment is usually a camouflage to get you to invest and hoodwink you to believe they are not interested in your money but are rather trying to help you prosper. If you look back, you’ll realize that most scam cryptocurrencies come knocking at your door using unsolicited means like social media or your mailbox.
Any moment you come across such a coin, just remember that you are a looking at a fraud. The most successful investor will tell you that no genuine investment consistently generates a huge ROI minus the attendant risks.
5. A Cryptocurrency Devoid Of Fundamental Characteristics
The fundamental characteristics of a genuine digital coin include decentralization, controlled supply, unlimited use, and a publicly displayed source code open for verification. If a cryptocoin lacks these basic characteristics, it qualifies to be called a scam.
The truth about most scam coins is that they have closed source codes; they don’t allow the public access to their source code. If you want to shield your investment, give any coin that doesn’t satisfy the above a safe distance.
6. A Cryptocurrency Based On Referrals and Commissions
Be on the lookout if the main way a cryptocurrency uses to make profits is from commissions or referrals; be terrified as you are dealing with a potential scam or Ponzi scheme. Such coins or companies will almost always collapse before you know it.
The Parting Shot
Even the most successful cryptocurrencies are criticized for being volatile and for their speculative investment attitude. The “get rich quick” idea is as old as you can imagine and it’s so tempting it sucks in beginners and the most seasoned investors into its murky waters.
If you will invest in cryptocurrencies, especially new crypto projects, and have your doubts, you are better off erring on the side of caution. Spend your time scrutinizing the finer details. Treat the presence or absence of important details as a RED FLAG. Verify the legitimacy of all claims using outside sources. Ask questions before investing and not after. Finally, remember, if a cryptocurrency project sounds too good to be true, it probably is.
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