Types of Crypto Scams to Watch out for
Diving into the world of cryptocurrencies can be exciting, but it’s crucial to stay alert. Scammers are always on the lookout for new victims, especially in an area as lucrative as crypto. Here’s a rundown of some common types of crypto scams and the latest data to keep you informed.
Phishing Scams
Phishing is one of the most prevalent crypto scams. Scammers send emails or messages that look like they’re from a trusted exchange or wallet provider. These messages often lure you into clicking on malicious links. Once clicked, these links can steal your login credentials or trick you into entering them on fake websites. In 2023, phishing was responsible for a significant chunk of the $1 billion lost to crypto scams. Always double-check URLs and never share your private keys or passwords.
Fake ICOs (Initial Coin Offerings)
Initial Coin Offerings are a way for new cryptocurrencies to raise funds. However, not all ICOs are legitimate. Scammers often create fake ICOs to lure investors with the promise of getting in early on a new, promising coin. They collect the money and disappear without distributing the coins. To avoid this, thoroughly research any ICO by reading the whitepaper, researching the development team, and checking independent reviews.
Ponzi and Pyramid Schemes
These schemes promise high returns in a short time but rely on the influx of new investors’ money to pay earlier investors. Eventually, these schemes collapse when there aren’t enough new investors. One infamous example is BitConnect, which was exposed as a Ponzi scheme in 2018 after raising approximately $2.4 billion. If a project offers consistent returns regardless of market conditions, it’s a red flag.
Pump and Dump Schemes
In a pump and dump, a small group of investors will inflate the price of a less-known cryptocurrency by spreading positive, but false, information. Once the price has increased, they sell their holdings at a high price before the reality catches up and the price plummets. Always be wary of obscure coins with sudden price spikes and too-good-to-be-true news stories.
Wallet Scams
Some scammers offer fake wallet apps, which you might download thinking they are legitimate. Once you deposit your crypto, the scammers have access to it. In 2022, there were reports of several such wallet apps appearing in popular app stores. Always download apps from verified developers and check user reviews carefully.
