Bitcoin trading has become very popular during the course of the last few years. We have witnessed the enormous price changes that this cryptocurrency has undergone in very short periods of time, which has inevitably led to increased interest.
With this increased interest unfortunately, also comes a surge in the number of scams led by unscrupulous parties.
If you are a bitcoin investor, or are contemplating becoming one, there are certain scams of which you should be aware and avoid. The most common types of scams fall under 5 categories – ICO scams, Exchange scams, Crypto wallet scams, cloud mining scams, and Multilevel marketing scams.
ICOs, or Initial Coin Offerings , are a popular way of attracting investment in bitcoins. This is a means by which companies that deal in blockchains raise capital for their ventures.
While this is a legitimate practice, there has been a surge in the number of inauthentic ICOs that are set up specifically for scamming unsuspecting bitcoin investors. The scam typically involves the creation of fake websites to which unsuspecting investors are lured and advised to deposit their coins into insecure wallets.
When the coins are deposited, they are basically stolen, and the investor loses all of his investment. The best way to avoid this type of scam is to conduct thorough research to ascertain the authenticity of the ICO, as well as the authenticity of the companies behind it.
The simplest way to trade bitcoins is through bitcoin exchanges. However, many cryptocurrency exchanges are still unregulated and not subject to certain operating rules, as are stock or currency exchanges.
This makes them vulnerable to scammers who steal the bitcoins once investors make the investment.
Exchanges that offer deep discounts may not be legitimate, as are exchanges without an encrypted website indicated by an address which includes “https” at the beginning.
Crypto wallet scams
Crypto wallets are supposed to be a safe way to store your cryptocurrencies. However, some crypto wallets are fake and are established for the sole purpose of scamming customers out of their cryptocurrency.
The best way to avoid this type of scam is to avoid accepting wallets from unknown sources. Only entrust your bitcoins to reputable, well-known wallet providers.
Cloud Mining Scam
Cloud mining is where some providers rent server space to allow customers to mine bitcoins. However, in some instances, these providers offer lifetime contracts which promise to keep the cost of mining constant for a lifetime.
However, usually, as mining becomes more expensive, miners get diminishing returns on their investments as time goes by. This can be avoided by understanding the terms of any contract before signing and agreeing to it.
Multilevel Marketing Scam
Multilevel marketing companies that offer bitcoin investment opportunities with the promise of massive profits, should be avoided.
Usually, customers are lured into investing large amounts, only to end up losing their investment, or making very little returns in the long run.
Again, the best way to avoid this type of scam is to do thorough research into the companies behind the opportunity before investing.