Bitcoin price experienced a meteoric rise in 2017. And this awakened the interest of the mainstream media in this cryptocurrency. However, this increase in Bitcoin price had some consequences.
For instance, more investors entered the market, followed by an increase in frauds and scams. Many stories of investors that lost their Bitcoins to shady ventures also emerged.
These scams can make some people fear investing in this cryptocurrency. However, these scams are the risk that any investor should be willing to take. Nonetheless, investors should be cautious and learn to identify scams. Knowing the top frauds in the industry can help investors avoid these traps and succeed in their investments. Here are the most common Bitcoin scams to avoid.
Exchange Scams
The decentralized nature of Bitcoins is partly the cause of exchange scams. However, it is sold and bought at exchanges. Currently, you can find many platforms like Bitcoin Gemini Google, where you can buy and sell Bitcoins. These platforms enable investors to find Bitcoins easily. However, there is no regulatory body to oversee these exchanges.
Consequently, many investors have become victims of scams when some exchanges close indefinitely. It’s painful for an investor to be left broke after investing through a Bitcoin exchange that turns out to be a scam. For instance, the exposure of many Bitcoin exchanges in South Korea in December 2017 prompted the country to implement stiffer regulations on the crypto market.
Therefore, investors should be keen to identify scams in the form of exchanges. For instance, investors should look out for unrealistic prices as major red flags. Some Bitcoin exchanges promise great discounts to investors to lure unsuspecting investors. What’s more, investors should check the URLs of the platforms. Genuine Bitcoin exchanges have URLs that start with HTTPS to indicate encryption of their traffic.
Cloud Mining Scams
Bitcoin mining provides a way to get new coins without exchanging or buying them. However, mining is a resource-intensive activity. New Bitcoins mining is a unique process that requires massive amounts of electricity and processing power. As such, you need a lot of money to mine Bitcoins.
But, regular users can rent server space and start to mine Bitcoins. You will come across companies that provide lifetime contracts to ensure the same costs. These promise investors outstanding returns. But, as Bitcoin mining becomes more complicated, the investment returns continue to decline.
What’s more, some companies are not transparent when making claims about their diminishing returns and actual costs. Some will even run Ponzi schemes with massive losses. Investors should consider the available opportunities carefully and analyze the associated costs and risks before investing.
Fake ICOs
The Initial Coin Offering has increased following the cryptocurrency boom. That’s because companies are looking for ways to raise capital. Many blockchain-based companies have entered the market with exciting projects and unique ideas. And this enables users to back their businesses efficiently. But, the massive explosion of the initial coin offering opportunities has raised the fraud specter.
Scammers are now stealing Bitcoins from scammers in several ways. For instance, scammers are creating fake sites that look like ICOs. After that, they instruct investors to deposit their coins into compromised wallets. In some cases, the ICOs are the ones at fault.
This crime has led to the suing of some blockchain ventures. Several ventures are liable for misleading investors, lying about products, and portraying fake staff members. Investors should, therefore, research blockchain ventures carefully to know the board members and the entire team behind them before investing.
No investment is entirely risk-free. However, Bitcoin investors should be vigilant to avoid being victims of these scams. Essentially, doing due diligence is a must before investing in Bitcoin to avoid being a victim of these scams.