You must have heard about crypto investment till now. Whenever something has a huge impact there are always things that add hurdles to it. Some hurdles consist of people who try hacking the system and some hurdles are people themselves.
Therefore when we are learning about a new technology we can always learn new tricks that people use to make that can save us from getting into these frauds.
In general, there are two kinds of frauds in cryptocurrency investment that we should be careful of.
One will be Fake projects and the other will be faking a real project.
Just like we have identified the top two things that we should be careful about while investing in cryptocurrency. We will also classify all the ways by which we can be careful in taking the next steps of investment.
There have been many cases where people have tried making a website pretending to work on projects that do not even exist. They make fake or copy white-papers to look legitimate.
Everything today is quite easy to fake if the reader is not paying enough attention.
Therefore it is most importantly up to you to pay adequate attention and find loopholes in the faulty systems.
Some ways which will help you to find the loopholes are:
- Make sure the website asking for the contribution is legitimate.
- Is the investment too good to be true? If it looks like one it probably is.
- If it tells you “Guaranteed high returns” maybe you should consider guaranteed non investing in it. After-all all investments are subjected to risks and no one, even the maker of the particular coin can guarantee the returns.
- Read the project description. Is it just a bunch of buzzwords? Famous buzzwords can be Ethereum killer, cutting edge, innovative project etc.
- Check if the blockchain is public and open. Ask if the code is open and whether there has been an independent cybersecurity unit.
- Have a background check of how frequently the teams work on the project. You can do that by checking GitHub repo.
- Be careful of unsolicited offers. Unsolicited sales pitch and offers are most often part of fraudulent investment schemes.
- Take your time doing enough research about the project. Do not overlook the step before handling your money to them. It is often the market tactics to pressurise you to “Buy now”. Not only fraudulent but genuine ICOs use it as well.
- Check if the company is legal or not. If they say that their company is outside your country find with the authority local database of that country to check if they are registered. If the country is in the US you can check the information from this website. The same will be available for other countries as well.
These were just the steps that would help you to check if the cryptocurrency is legitimate or not.
It is very easy to think that everyone is getting rich with bitcoins. Investors are looking for the next big Alt-coin. The fear of missing out makes it very easy for the scammers to take advantage of it.
Here are a few products that the scammers may bring to you.
- Fake ICOs:
ICOs are a way for investors to invest in new tokens and receive a token in return. While many ICOs are legitimate, sadly most of the ICOs are fake and often do not release. They do not have any technology o real business behind it. Even after release, they are merely just whitepaper by individuals with no knowledge or experience.
Many countries like China have already banned the sale of ICOs as most fake ICOs are sold based on false claims.
- Fake brokers or exchanges:
There are exchanges and brokers who take advantage of the volatility to make the most out of other’s investments. There are dozens of unregulated platforms that let you invest initially very easily but after that make it very difficult either to trade or withdraw the amount. In worst cases, these platforms just steal your money.
Apart from these people schemes like trading may also be not so easy for everyone as it is shown. People often find themselves going for trading without considering the ridiculously high prices imposed by exchanges on withdrawals. These margins eat up the majority of your profit and may also lead to a loss.
Therefore to avoid such scams you can try investing through CFD (contract for difference). CDFs can be a good way to invest by not risking all your assets at the same time. The brokers often have low-risk investment portfolio management systems that make it easier and safer to invest.
Moreover to do not own any currency which makes it safer than buying through unregulated exchanges and falling in the trap.
Should I stop investing then?
The volatility of the crypto market has brought high returns as well as the risks involved. While investing in it mindfully will bring you good returns as well as a secure future there are always things you should be careful about. After all, the best returns have always come from carefully examining the market and investing in the best.
At Libertypool, we are empowering investors around the world to achieve financial independence through asset accumulation, especially by cryptocurrency investment. Learn More.