Popular cryptocurrencies like Bitcoin, Ethereum, and Dogecoin have enjoyed a great year. These cryptocurrencies reached new highs, capturing the interest of those who were previously unfamiliar with the market.
However, cryptocurrency is unpredictably volatile. It’s still an extremely unpredictable market with practically no laws protecting individuals who, for example, invest in the stock market. Scammers have salivated at all the newfound chances to profit at the cost of crypto newcomers who have flocked to this lawless wild west over the last year.
What are the common red flags in cryptocurrency?
To begin, look for several frequent red signals that are comparable to traditional money wiring schemes and credit card fraud:
- There are typographical mistakes and blatant misspellings in emails, social media posts, and throughout any conversation.
- Offers to increase your funds
- Contractual commitments prevent you from selling your cryptocurrency.
- Influencers who pretend to be celebrities but aren’t
- Blackmail or extortion are examples of psychological manipulation.
- Large crypto scams on social media
- Free money promises
- Uncertainty about where they spend the money.
What are the common scams in the cryptocurrency market?
Even the most knowledgeable and passionate cryptocurrency professionals recognize that the world of crypto is now rife with new and developing threats. Below are some of the common scams in the cryptocurrency markets.
1. Fake identities
At least some of the most common cryptocurrency frauds have catchy names. However, the consequences for victims of this brutal con are dire. This fraud usually starts on online dating services. The fraudster uses an appealing profile photo to entice the “pig,” then utilizes online messaging to “fatten up” the victim throughout time. The victim gradually becomes closer to and more trusting of the culprit.
The con artist finally informs the client about certain massive gains they’ve achieved in the crypto market. They later convince them to join them in specific trades that appear to yield them nicely on paper. Naturally, the fraudsters steal money as soon as the victims deposit it. The fraudster utilizes fake websites to trick their victims into depositing increasingly large amounts of money to this false account. Withdrawals are impossible in this account.
2. Demanding crypto-only payments
It’s most likely fraud if a seemingly trustworthy individual or retail outlet declares they don’t take any currency other than Bitcoin or Ethereum. Since bitcoin and other altcoins are a growing asset class, analysts believe that reputable institutions will not take crypto without simultaneously accepting US dollars via wire transfers, cheques, credit and debit card transactions, and cash.
Anyone requesting payment in Bitcoin may be attempting to hoard it and profit from its increasing value. Blockchain, unlike banks, lacks standard know-your-customer (KYC) processes. This implies that consumers may access their wallets without presenting a legitimate identity, a Social Security number, or an address and contact information. Even though blockchain is accessible to the public and provides permanent and open-access records. Furthermore, anybody may deal with it anonymously, making it easier to defraud you, take your money, and go.
3. Phishing scams
Phishing fraud, which is not unique to cryptocurrencies, is one of the most popular scams in the industry. It entails duping victims into disclosing personal information like passwords and keys to their digital bitcoin trading platform.
The “private keys” required to unlock any safe crypto wallet are “keys.” It functions similarly to a password and is the only way to access your funds. Moreover, phishing schemes utilize everyday identity theft and corporate crime and are frequently sent over email, with criminals acting as authorities and requesting credentials. These scams are also on all social media.
You should not click on any random link you find on Twitter. Frequently, attackers promise wealth and ‘yields’ in exchange for information “confidential information. However, if you’re using another popular communication medium, double-check the Twitter accounts or the Discord ID. Make sure you’re getting connections from reputable sources’ accounts. It does, however, take some time, but it is well worth it.
4. ‘Pump and Dump’ scam
“Pump and dump” schemes aren’t new to cryptocurrencies. However, without the same level of regulation as equities traded on major U.S. exchanges, the wild west of finance is rife with fraud, including the pump-and-dump scheme.
Scams like this, which are also common in penny stocks, are defined by a limited number of insiders who hold a particular asset, a digital currency. These thin assets are then made public whether through social media, word of mouth, or other means of promotion.
Insiders begin to sell or dump the shares at high prices, creating a dramatic sell-off and benefitting at the cost of the deceived masses. When the uneducated investing public rabidly picks up the cryptocurrency, which is frequently newly minted with little trading history.
For example, certain members of FaZe Clan, are among the most widely played groups globally. They were active in marketing a new cryptocurrency known as Save the Kids, which pledged to donate a percentage of its revenues to charity. The coin dropped in a matter of days, and members of FaZe who were engaged in the launch were either punished or dismissed from the group. Later on they distanced itself from their actions. Some traders accused the group of participating in a pump-and-dump scheme, even though the fired team member stated that he had “no bad intent” in pushing the coin.
5. ‘Rugs pull’ scam
Rug pulls ahead of cyber forensics, and incidents are one scam to avoid. Rug pulls occur when the proponents of a cryptocurrency inflate the price of their new coin before fleeing with the proceeds. The investors remain to hold a worthless token. This is especially true for currencies with no fundamentals and no actual prospects.
A fundamental distinction between a pump-and-dump scheme and a rug-pull scheme is that the latter frequently does not enable non-insider dealers to take. The token is set to enable only initiates to escape. Insiders may carry out these frauds in various methods, some of which are unique to cryptocurrencies.
The rug-pull scam got a lot of interest in late 2021, when Squid Game, a newly launched cryptocurrency named after the wildly popular Netflix Inc. series about a game whereby all participants are killed except for the one, who arises with immense wealth, lived up to its name and prohibited selling.
Many individuals have compared the frenzied rush into cryptocurrencies to the Wild West. Scammers will continue to target the crypto ecosystem as it grows in size and complexity. There are two types of crypto scams: socially engineered efforts focused on gaining account or security information and having a target transmit bitcoin to a compromised digital wallet. You’ll be able to recognize a crypto-related scam early and avoid it from occurring to you if you understand the main methods scammers try to steal your information (and eventually your money).
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