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Crypto Scams

Crypto Scams: What They Are and How to Avoid Them

Written by
June 15, 2022

Crypto Scams

Photo by geralt on Pixabay

Making money from the stock market is a challenge for even the most seasoned investors. It’s not a surprise that people look for shortcuts and tips to making money trading stocks – but with so many scams out there, it can be hard to find a reliable place to get advice on how to invest your money. Thankfully, there are some great resources out there that can help you avoid crypto scams. But with so many new ICOs coming out every day, it can feel like you’re drinking from a fire hose when trying to figure out which new opportunities are legitimate and which are likely to just take your cash and run. In this article, we’ll talk about some of the biggest red flags when it comes to investing in cryptocurrencies, as well as how you can avoid being ripped off by scammers.

What is a crypto scam?

Scams are false promises that get investors to part with their money without receiving any real value in return. Some scams are obvious, but others are much harder to see – and people can lose money in even the most legitimate-looking projects. There are many different types of crypto scams – but some of the most common include false advertising, pump and dump schemes, repackaging old ideas, false team members, and plagiarism. False advertising - Some crypto projects make promises that are just not possible with the technology they’re using. Other times, they use very misleading language to make their project sound more attractive. For example, one project called themselves the “Amazon of Blockchain” – but their product was just a wallet app. Amazon is a $500 billion company that sells everything from groceries to cars – their product is just a wallet app. Pump and dump schemes - Some scammers will buy up a project’s tokens early on, then try to dupe investors into buying those same tokens. Once the new investors have bought in, the scammers will sell their tokens and walk away with a healthy profit. It’s called a pump and dump because they try to create a false sense of demand for the token by “pumping” up the price with positive news, then “dumping” their tokens onto the new investors at a higher price. Repackaging old ideas - Some scammers will simply take an existing product and repackage it as their own. For example, one project called itself the “first decentralized exchange” – but there have been decentralized exchanges since the 1990s. False team members - Some scammers will create a team of fake experts to build up their project’s legitimacy. There have been cases where a project’s team members are either fictional or taken from another unrelated project. Plagiarism - Some scammers will take whitepapers and other content from more legitimate projects and just change one word to make it look like they created it themselves.

Look for red flags

With so many scams out there, it can be hard to know which projects are legitimate and which ones are likely to disappear with your money. If a project seems too good to be true, it probably is. Look out for these red flags when deciding which projects to invest in. - Is the project solving a real problem? - If a project isn’t helping solve an actual problem, it’s probably a scam. Make sure the project you’re thinking of investing in solves a real problem – or else it probably won’t have a sustainable business model. - Is the project realistic? - Some scams promise to do things that are just completely unrealistic. If a project says it will be the next Bitcoin but has a team of two people and no viable product, it might be a scam. Always be realistic about the potential of the project you’re investing in. - Are they following industry standards? - Some scams take advantage of very technical subjects and use confusing language to try to trick investors. Make sure that the people behind the project are following industry standards and are communicating their ideas in a way that most people can understand. - Is the team trustworthy? - Some scams have false team members, and others have team members with sketchy pasts. Before you invest in a project, make sure you can trust the people running it.

Research the underlying product

Not all projects are scams, but even if a project isn’t technically a scam, it could still be very poor investment. Before you invest, you should really understand what the underlying product is and if it’s likely to be valuable in the future. If the underlying product is creating a new blockchain, for example, you’ll want to know why they’re building it. If they don’t have a good reason for creating a new blockchain, or if it doesn’t make sense, you should probably avoid investing. If the underlying product is a token, make sure you understand how the token is supposed to be used in the future. If the token doesn’t seem like it’s useful in the long term, it might be a bad investment.

Summing up

Cryptocurrencies are an exciting but risky investment. There are some great investment opportunities out there, but there are also many scams. Before you invest, make sure you know what to look out for. If a project seems too good to be true, it probably is. Look out for these red flags when deciding which projects to invest in. Before you invest, make sure you understand the underlying product and whether or not it’s likely to be valuable in the future.

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