As we all know, Bitcoin is the most favoured cryptocurrency among digital currencies.
Investing in Bitcoin and other cryptocurrencies can be a wild ride if you’ve got the stomach. One of the pitfalls of new investors entering the digital market is the rise in scams and fraudulent activities.
Unexpected fraudulent activities happening around the exchange of currencies and scams reduced the opportunities for new investors. These traps or scams should be avoided to have a successful result in the investment.
This article lists some of the most significant Bitcoin scams and how to avoid them.
Common Bitcoin Scams to Avoid
If you are in the crypto field, you might be familiar with some scams. But if you are new to this field, you must be aware of the risks. Here are some of the biggest scams you have to look out for.
Fake Cryptocurrency Exchanges
One of the most prevalent scams is the exchange of bitcoins. Even though a decentralised network manages Bitcoin, investors continue to buy or sell the cryptocurrency for exchanges.
Investors will be excited to have an exchange and may believe any source promising an exchange for their Bitcoins, but later they will realise that it was all a trap to steal their money.
This scam is complicated to find out. You have to think twice before moving with such a type of exchange. This scam leads to the loss of all your funds unexpectedly.
ICO (Initial Coin Offerings) is in trend among all organisations to raise their capital fund to kickstart their business. When investors look for considerable gains, they go behind this fraudulent ICO. With the advent of blockchain technology, many organisations are in the digital market of cryptocurrency with innovative ideas.
They begin their own business by offering the ICO. And these opportunities provide the space for fraudsters to hack the investor’s Bitcoins. Plenty of scammers are available with this fake ICO. They produce a false website and ask investors to deposit their Bitcoins into the fake wallet.
This scheme can be identified easily, but still, people go behind this scheme. If any crypto project motivates an unreasonable and illogical high return on investment, clearly note that it is a Ponzi scheme. It acts like a pyramid scheme. It encourages investors to recruit new investors. The fund of new investors is taken to pay the old investors.
Phishing scams are yet another type of common scam among the bitcoin scams. Here the hackers will try to get your data, like user credentials, through Email. An email scam is a type of Phishing Scam.
When scammers get access to a username and password, it is easy for them to hack your Bitcoins from a hardware wallet.
Pump and Dump Scam
Pump and dump have been a traditional scam, but now, it has become one of the standard Bitcoin scams. Here, a group of fraudsters will purchase a stock of currency; as a result, the supply is reduced, and the demand is increased.
Now the price of the currency will be inflated, and the fraudsters will be in search of investors of Bitcoin investment. They guarantee to provide the stock with a lower price than the going rate, and investors fall for such scams.
Rug Pull Scams
A Rug pull is very much similar to ICO scams. In that, a highly anticipated cryptocurrency project turns out to be vaporware that doesn’t exist. To generate interest and attract investors, it may be common to see a cryptocurrency “aped” on social media or in crypto communities by founders or developers.
Then, the originator or developer vanishes with the money from investors. In other words, investors have the rug pulled out from under them. These kinds of scams are relatively common in cryptocurrency because it doesn’t take much for a scammer to create enthusiasm, especially if they’re somewhat of a showman.
A man-in-the-middle scam requires a third party to intercept information between an investor and their exchange or another investor. The scammer can access sensitive information, like passwords or wallet keys, and uses them to swipe your assets.
These scams are carried out by scammers using technical ruses and wireless internet signals. Although these are not typical scams, many investors could nonetheless be at risk.
Social Media Giveaway Scams
Endless frauds run fake Bitcoin giveaways on Facebook, Instagram, and other social media platforms. They send fake screenshots with fake messages from famous companies or celebrities like Elon Musk promoting the giveaway. Both accounts are with flocks of fraudulent posts, seemingly confirming their legitimacy.
The worst thing that can happen is that you wind up clicking a malicious link, scanning a fraudulent QR code, or entering your account information on the fraudulent site, which can result in a significant loss of money.
How to Spot Bitcoin Scams?
As previously mentioned, most Bitcoin scams are based on tried-and-true strategies used in many other areas of the financial world. There are certain common red flags to look out for.
If crypto promises massive returns on your investments, that would rather be a scam. This goes with other types of scams too, however, in order to build a massive pool of potential schemes. If they do, proceed with caution.
Scammers Always Request Up-Front Payments
It is not common that you’d be asked to pay upfront with cryptocurrency. If so, that would undoubtedly be from scammers. There will be no recourse if they take your Bitcoin away. So You have to be cautious if someone asks you to send them Bitcoin with promises of delivering later.
Appeals to Emotion
A common strategy scammers use is to appeal to someone’s emotions. If you find someone very close to you asking to send them crypto for one reason or another, it could be another sign that you are being scammed.
How to Avoid Bitcoin Scams?
Keep a digital wallet
A digital wallet runs with a blockchain network, each having a private key and a public address. You can use your private key to make purchases, send crypto to other parties, or move it to exchanges. And the public address allows you to receive transactions.
Two kinds of wallets meet consumers’ various needs.
- Cold Wallet
Cold wallet is an offline wallet which is not connected to the internet. They are considered as more secure and virtually impossible to hack. It is typically used by experienced ones or those with large assets.
- Hot Wallet
Hot wallets are connected to the internet and are easy and convenient to use. So most types of crypto wallets are hot types. But it is more vulnerable to hackers compared to cold wallets. So it is recommended not to keep a large amount of cryptocurrency in a hot wallet.
Keep your Crypto Software Up to Date
Having solid online security requires routine maintenance to keep everything operating correctly. Hackers never stop attempting to evade software security.
Software makers amend the security to close the loophole when a vulnerable code is discovered. However, unless you get the update, it won’t help you at all, no matter how good they are at closing the vulnerability.
Top updates seem dull, but almost every hacked software needs the latest updates. Therefore stay on top and keep your crypto-related software up to date to avoid losing your valuable Bitcoin.
In this article, you can see the list of common Bitcoin scams hinging around the crypto world. You can also learn to avoid these scams to protect your wallet and Bitcoins. This allows you to safeguard your Bitcoins and improve your return on investment without any loss.
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Everyone says, “It can’t be me, I’m too smart for that,” until they find themselves in that dreadful condition, just like me. I’ve been there before; I never expected to be a victim, but it happened to me. I had often heard individuals claim that much money might be recovered, but I had always been doubtful. This blog was really helpful and able to reclaim my funds fast and easily.