Four common cryptocurrency scams
This is probably the highly requested question, considering everyone wants to earn money on cryptocurrencies. But, as with any form of investment, you need to take some risk. The easiest way would be to stay at your home and don’t mess with your hard – earned cash. But, if you have money and you are willing to trade, then we have a couple of advice for you. Here are five common scams, and how to avoid being caught out. Otherwise, it’s going to hit you had, and you may lose all your money.
Suspicious exchanges
As the popularity of digital currencies grows, so as the number of exchanges increases. They all want your attention, and they all want to make you invest money with them. Exchanges directly earn money on fees. However, if you’re going to find a reliable digital currency exchange, then you will have to review them carefully. Even the popular exchanges have known to disappear overnight, taking all your money and coins with them. If you are new to this trading world, you probably haven’t heard about Mt.Gox. This was one of the first cryptocurrency exchanges, and at one point they had over 70% of all bitcoins. In 2014, in February, the suspended all their transactions because 850,000 of bitcoins have been stolen. On this example you can see that trust and reliability in the digital world doesn’t mean too much.
Pyramid and Ponzi scheme
In early 2017, a company based in Mumbai, called OneCoin was giving a sales pitch to some investors. Indian police raided the meeting and jailed 18 OneCoin executives for performing a Ponzi scheme. But, even though, they were arrested they managed to move more than $350 million via payment processor. A lot of investors lost their money in this process. Unfortunately, digital currency is creating new scams every day and using the technology average users never heard about.
Pump and dump
Even the most prominent financial experts have dismissed digital currencies as a scam. Some of them even compare bitcoin with other safe investments, such as gold. On the other hand, others believe this is just a humping and dumping and that exchanges are only earning money. Bitcoin has already established its place in the trading world, so it would be challenging to alter the price. However, smaller altcoins aren’t so resistant to humping and dumpi
g. In this case, the exchanges are increasing the volume of trades, but the price stays the same.
ICOs
This is a so-called initial coin offering, and in this case, the digital currency startups create initial coins to raise a significant amount of money. In addition to this, a lot of them overestimate the price of their startup. But, there are some things you can do to avoid this scam. For example, when you don’t know a lot of facts about the company, they don’t have publicly available information, nor media press releases and they have questionable trading tactics. If you spot any of this, run!