How to avoid cryptocurrency scams | #socialmedia

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As public interest in cryptocurrency investing has soared, so have cryptocurrency scams. 

Between 2020 and 2021, the amount of crypto held by the average investor climbed more than 15%, the Financial Conduct Authority found. But investors’ Fear of Missing Out on this hot new sector has attracted scammers large and small.  

In this article, we will show you:

  • How to spot common cryptocurrency scams a mile off
  • The key ways to avoid fraud and keep hold of your crypto
  • The safest crypto wallets to store your wealth
As public interest in cryptocurrency investing has soared, so have cryptocurrency scams

Is crypto safe?

Even seasoned investors often ask: is cryptocurrency safe? 

Just as with any other popular investment, there are always thieves looking to profit from investors’ eagerness to earn, and their lack of expertise.

Cryptocurrencies – particularly bitcoin – are hot news. They have produced returns that S&P 500 or FTSE 100 investors could only dream of. 

This naturally attracts scam artists. And it can be a bit tricky to weed out the conmen from those who are just competent.

This is because cryptocurrency is a complicated idea, and much of the industry sits in a regulatory grey area. 

Cryptocurrency is provably secure, mathematically. Transactions involving digital currencies are stored in blocks that are linked together in a chain.

Once a block has been added to the end of the chain, it can’t be removed or undone.

All the computers that secure the network share a golden copy of the correct ledger of transactions. They are rewarded in a blockchain’s internal currency, such as bitcoin or ether, for keeping it safe and up to date. 

But that’s not the question that most investors are asking. Crypto has been widely used as a payment method for scams, misdeeds and ransom demands.

The most notorious example is the NHS ransomware hack of 2017. This led to the UK’s emergency health services being downed as part of a global cyber attack.

Clearly there are risks and dangers for the uninitiated.

Find out more: Cryptocurrency trading for beginners

Spotting a cryptocurrency scam

The following list covers the main types of cryptocurrency scam. As with any investment decision, the best way to protect yourself is to:

  • Never take any information at face value.
  • Remain curious. 
  • Always do your own research before making any financial transactions.

Coinbase scams

Trading venue Coinbase* is one of the world’s most recognised cryptocurrency brands. The exchange went public on the Nasdaq stock exchange in America in April 2021. 

But its popularity has led to it being used in SMS and email phishing scams.

These types of fraud aim to get the potential victim to click on a dodgy link. Visiting that shady website lets thieves plant malware or other computer nasties on their target’s mobile or PC, to harvest their data or steal other personal information. 

It’s a low-tech scam, but effective.

Find out more: What is an NFT?

Technical-support scams

When there’s money involved, we often want to defer to someone who knows more than us. And this is where the crypto technical-support scam comes in. 

The FBI warned in 2018 of scammers posing as cryptocurrency exchange support staff, gaining the trust of victims and then parting them with their digital currency investments. 

A scammer’s aim in this case is to get the passphrase that unlocks your cryptocurrency digital wallet. This allows them to filch that crypto by sending it to another wallet. 

The most secure crypto wallet is a matter for debate. Software wallets such as MetaMask are extremely popular, this one boasting five million monthly active users.

It is always internet-connected and typically comes as a browser extension for Google Chrome or Mozilla Firefox, or as a mobile app.

Others swear by hardware (offline) wallets like the market leaders Trezor Model One and Ledger Nano. 

Giveaway scams

We all love getting something for nothing. And that’s what makes giveaways one of the more successful methods of theft in cryptocurrency scams. 

In one common ruse, victims are told they will double their crypto if they send it to a celebrity — faked, of course. The US Federal Trade Commission told Reuters in May 2021 that $2m (£1.45m) had been sent to Elon Musk impersonators in just six months.  

Telegram and Twitter are infamous for hosting known scammers that promise crypto in “airdrops” — in essence, free coins sent to your cryptocurrency wallet.

The kicker is usually that victims are forced to divulge sensitive personal information or scammed out of their own crypto. 

Find out more: The best eco-friendly cryptocurrencies

Employment scams

Students and job-seekers can be roped into employment scams. They are offered bitcoin for carrying out tasks, then told they now owe their new boss money. 

Anyone who has grown up in the gig economy will recognise this. 

Criminals may also pose as recruiters, and social media is thick with complaints of thieves offering high-profile opportunities as a way to steal data — for example, in these Coinbase scams.

Crypto phishing scams

Crypto phishing scams are much the same as faked emails, SMS texts from an unknown number, or any other irritating con attempt. They are depressingly common. 

Cryptocurrency Ponzi and pyramid schemes

Reports of people gaining great riches from cryptocurrency naturally pull other investors in.

But there are opportunists out there ready to steal your crypto by pulling a classic Ponzi scam.

A Ponzi scam is where, instead of being invested in assets to generate returns, the money from new investors is used to pay earlier investors what they assume to be big returns — so enticing more backers.

In the process, the fraudsters siphon off some of the cash for themselves.

Find out more: ‘I made £8,500 from bitcoin’

What is the most secure cryptocurrency?

Few have had no history of ever being successfully hacked.

And there are just a handful of cryptos that meet this criteria for more than five years: bitcoin, ether and litecoin.

Find out more: Alternatives to bitcoin

There are over 11,000 cryptocurrencies in existence today
There are over 11,000 cryptocurrencies in existence today

Is phoneum a scam?

There are over 11,000 cryptocurrencies in existence today, according to the market data provider Coinmarketcap. So keeping on top of which projects are legitimate, like bitcoin and ether, and which ones could be a swindle is a full-time job. 

Phoneum has a poor reputation online. And while that alone doesn’t make it a scam, phoneum has several attributes that should raise red flags with would-be investors. 

It is only listed on a single cryptocurrency exchange, and not a well-regarded one such as Coinbase*, Bitstamp or Gemini.

The trading volume (how many coins people are buying and selling on a given day) is also very small at less than $5,000 worth

Newcomers should be wary of those projects with very little visibility that suddenly pop up out of nowhere and go heavy on the marketing for a short time. They could disappear just as quickly.

*All products, brands or properties mentioned in this article are selected by our writers and editors based on first-hand experience or customer feedback, and are of a standard that we believe our readers expect. This article contains links from which we can earn revenue. This revenue helps us to support the content of this website and to continue to invest in our award-winning journalism. For more, see How we make our money and our Editorial promise.

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