Attention: You’re about to lose your hard-earned money.
People are constantly being targeted by crypto scams, and they don’t even know it. It’s difficult to risk-proof investments when you don’t know what’s really happening.
Crypto scams can happen to anyone, and more are popping up every day. With so many out there, it may be difficult to trust any business that has anything to do with cryptocurrency — that is, if you know what to look for.
For those who think something is not right with their crypto investment now, the red flags of the crypto scams listed below will come in handy.
-A poor or nonexistent whitepaper.
A good introduction to a cryptocurrency should, at the very least, include a whitepaper. This document is critical for understanding how a project is designed to work and why it exists. The document should provide details on the specific design choices and how they shape the project’s function. If the whitepaper doesn’t make sense or doesn’t exist, it could be a warning sign that the company is not legitimate.
One way crypto fraudsters attract people is by spending heavily on marketing campaigns. They might invest in online ad campaigns, get paid influencers to promote them, and more.
This is designed to reach as many people as possible in the shortest amount of time possible to ensure that they earn money as quickly as possible. If marketing for a crypto offering seems over-the-top, then you may want to be cautious. If you want to reliably invest, it is important to make sure that the claims are backed up by solid facts and reasoning.
-The Offer Is Too Good To Be True
We want the best deal when it comes to our money or cryptocurrencies. That’s why we need to make sure that exchanges have good rates, so you don’t end up getting cheated. Bitcoin is not centralized, which means most cryptos have their own exchange rate.
If you see website offering rates that are significantly lower or higher than other established exchanges, then it’s a giant red flag for crypto scams. You need to think carefully about where best to spend your money. Investing in well-known and reliable platforms will save them time and money in the long run, as opposed to risking everything on a shady service.
– Lack of transparency
One way to find out more about an investment company is by looking at their website. For example, most websites will have an easily accessible bio for the key people running them and (in some cases) social media accounts where they’ll share updates.
If a company does not provide any information about its founders, location, and licensing status, then it might be a scam. If you can’t find any information about who they are, these are the red flags you should be aware of.
– Promises of guaranteed returns and free money
No financial investment can guarantee future returns because investments can go down as well as up. Any crypto offering that promises you will definitely make money is a red flag. The idea of free money is one that is too good to be true. Any investment opportunity promising free money is likely to be fake.
– Cryptocurrency ICO’s
Initial Coin Offerings (ICOs) is an unregulated means of crowdfunding for projects that use blockchain technology. They allow people to purchase tokens from startups before they have even started trading on an exchange. This can be risky because many ICOs will fail and investors will lose money.
However, ICOs also provide the opportunity for investors to buy into the cryptocurrency that the startup is developing.
This is easy to explain: Imagine someone invents a new form of digital money called “Xcoin” and decides to sell it at a price of $100. The problem is that no one wants this new form of money because it’s not as trusted— so the person holding Xcoin decides to try to raise awareness of its quality. They make it free and spread a marketing campaign about it. After six months, Xcoin is worth $10.
What can happen in cryptocurrency? -In many cases, coins will be used for illegal purposes, such as money laundering and funding terrorism. The individual or organization that is responsible for the coin may be motivated by profit and/or ideology.
People who bought into this coin could lose money. An individual or group responsible for the creation of a new coin could then decide to pump it and sell it off. This could cause a major decrease in value for anyone who bought into it.
The best way to stay safe from cryptocurrency scams is by being aware of the red flags and following this simple rule: If it seems too good to be true, it is probably a scam.