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As you become more involved with the new digital monetary systems known as cryptocurrencies, you quickly realise that there is danger associated with these transactions.
The current volatility of cryptocurrencies has resulted in an inflow of investors trying to profit from the growing commodity. And cryptocurrency-based assets and technologies, such as non-fungible tokens (NFTs) and decentralised finance (Defi), may add to the attractiveness by providing possible new revenue streams. However, as cryptocurrencies become more popular, the Federal Trade Commission (FTC) has noticed an increase in Bitcoin investment fraud/scam losses. The FTC acquired 6,792 Bitcoin investment fraud claims between October 1, 2020, and March 31, 2021, with over $80 million in alleged losses.
Because of the possibility of fraud, you should take precautions when making Bitcoin investments and maintaining your cryptocurrency holdings. Here are some of the most typical Bitcoin-related scams to be aware of, as well as some techniques to prevent them before deciding how to buy and sell Bitcoin.
THE ACT OF PHISHING:
The first scam on the listing is one that you may already be aware of since it has been regularly utilised to target clients of big institutions. This form of fraud, termed “phishing,” happens when you get an unauthorised email that seems to be from your bank — or, in this case, from your crypto exchange or wallet service. This email includes a link that will lead you to a site that seems almost comparable to the exchange platform or wallet you normally use, but it is a fraud. Hackers have all they need to get into your genuine account and steal your cash after submitting your account credentials on this unauthorised page. Here are some tricks to help you dodge phishing scams:
- Always double-check URLs to ensure you’re on the right website.
- Do not click on any questionable links sent to you through email.
- Never reveal your private wallet keys or exchange credentials to anyone.
FAKE BITCOIN EXCHANGES AND WALLETS:
When learning how to buy and sell Bitcoins, the next scam is knowing about fake exchanges and wallets. Keep a lookout for bogus Bitcoin exchanges, similar to phishing frauds. They may appear to be a trustworthy exchange, but they are only a ruse to take people’s hard-earned money. Some would tempt customers with promotional deals that appear too good to be true. Others may encourage users to open an account and deposit dollars, maybe even giving “bonuses” to those who deposit higher sums. However, once they have your money, these sites may demand exorbitant fees, make withdrawals difficult, or even take your investment entirely.
Other con artists have focused their efforts on developing sophisticated counterfeit wallet applications that may be used to steal essential account information if downloaded to a user’s smartphone. These applications have even found their way into official, respectable app stores like Google Play, so do your homework before installing anything. Some ways to avoid getting into this kind of scam are the following:
- Stick to well-known and well-liked exchanges.
- Before making an account, thoroughly study any exchange or wallet – who is the organisation behind the exchange or wallet? Where is the business registered? Is there any trustworthy feedback from other users that confirms its legitimacy?
- Don’t succumb to pressure to deposit money or provide personal information.
- Don’t just choose a wallet randomly from the app store; instead, only download apps and programs from reputable wallet issuers and marketplaces.
PYRAMID AND PONZI SCHEMES:
The third scam you need to learn before learning how to buy and sell Bitcoin is a pyramid or Ponzi scheme. A Ponzi scheme is a simple but frighteningly efficient swindle that entices new investors with the promise of huge profits. It works as follows: a promoter persuades individuals to invest in their plan. These early investors get what they assume are profits but are distributions from funds invested by newer investors. Now that they are convinced that the scam is legitimate, the investors who have gotten dividends put additional money into the plan and persuade others to do the same.
The plan eventually fails when the promoter disappears with the money or becomes too difficult to attract fresh investors. These sorts of pyramid scams are nothing new and can be easily identified, but that hasn’t stopped several high-profile crypto purchasers from getting duped. Here are two effective ways to avoid pyramid schemes:
- Look for Bitcoin initiatives that push you to acquire new investors to increase your income.
- Never put your faith in a system that promises returns that seems too fantastic to be true.
Cryptocurrencies are difficult, confounding to novice users, and poorly regulated, making them a perfect target for fraudsters. However, with a bit of knowledge and some old-fashioned common sense, you can do a lot to protect yourself against Bitcoin fraud. Knowing about different scams and tricks to avoid them is integral to learning how to buy and sell Bitcoin.