Several investors are drawn to Cryptocurrency markets because they are unregulated and operate largely beyond the supervision of central banks and other government authorities. However, this makes them vulnerable to scammers and cyber-criminals. There have been analogies between the current growth stage of such marketplaces with the era preceding the restoration of authority in the American West. Reports of Cryptocurrency-related scams continue to rise, and millions of dollars are said to have been lost due to these schemes. As a result of these changes, it is critical to understand what consumers and investors can do to protect themselves against fraudsters. A few of the most 5 common Cryptocurrency scams to watch out are as follows

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1. Ponzi Schemes

It is a form of financial fraud in which victims are duped into investing in non-existent enterprises or "get-rich-quick schemes" that serve no purpose other than to line the fraudsters' pockets. Fraudsters are always developing "cutting-edge" technologies that are not fully detailed in order to entice investors and make bigger virtual profits, and Cryptocurrency is excellent for this. Whenever the money is digital, it is simple to fabricate evidence.

2. Phishing Scams

Phishing schemes target information related to online wallets in the context of the Cryptocurrency sector. Scammers are particularly interested in Crypto wallet private keys, which are the keys necessary to access funds stored in the wallet. Their operation is similar to that of many common frauds. They send holders an email that directs them to a specially designed website where they must submit private key information. Once the hackers have obtained this information, they will be able to steal the Cryptocurrency stored in those wallets.

3. Pump and Dump

Scammers use fake information to persuade investors to acquire Crypto assets in little-known Cryptocurrency ventures. The value of the assets rises as a result, and the fraudster sells his own shares, making a tidy profit while leaving the victim with useless shares.

Also read: Why Are Private Keys Important?

4. Business Opportunity Scams

The cliché "if anything seems too good to be true, it usually is" is one to bear in mind for anybody embarking on investing in general, but it is especially relevant when it comes to Cryptocurrencies. Endless profit-seeking traders gravitate to deceptive websites that promise guaranteed returns or other schemes that need investors to deposit big sums of money in order to receive even higher returns. While money flows freely in, these fraudulent pledges frequently lead to financial disaster when people want to get their money out and discover they can't.

5. Fake Celebrity Endorsements

Scammers use famous social media profiles to set up false accounts, urging followers to invest in bogus schemes like the ones described above. In one of the instances, an amount of $2 million was stolen by scammers who even placed Elon Musk's name on a Bitcoin address to make the hoax appear more credible. If a celebrity sends you a message for investing motives on these social media accounts, then please do not reply as it is a scam and you might be in trouble.

Are Cryptocurrency Scams on the Rise?

Sadly, this is correct. Cryptocurrency scams have grown tremendously in recent years as a result of the Cryptocurrency explosion. Elliptic, a Crypto asset risk management, reports that Decentralized Finance (DeFi) clients and traders had lost $10.5 billion due to cybercrimes as of November 2021, a 7-fold increase from $1.5 billion in 2020.

According to the FTC, almost $80 million was stolen in the United States between October 2020 and May 2021 as a consequence of hundreds of Cryptocurrency-related frauds. In comparison to the traditional stock market, there are little to no laws controlling the Cryptocurrency market for investors.

The Bottomline

Because of the tremendous rush into Cryptocurrencies, many people compare them with the Wild West. Scammers will continue to prey on the Crypto ecosystem as its size and complexity expand. Scams using Cryptocurrency come in two forms, as previously mentioned: social engineering attempts intended at collecting account or security information and demanding the victim to transmit Cryptocurrency to a hacked digital wallet. Understanding how fraudsters exploit your personal information to steal your money can help you avoid being a prey of one of these frauds by detecting a Crypto-related scam early in the process.

Also read: Which Are The Best Crypto Wallets For 2022?

One must not trust Cryptocurrency giveaway posts easily on social media platforms like Facebook, Twitter, and so on. They will be deliberately planted in order to entice the unsuspecting into disclosing critical information or money. Never reveal the private key used to get access to a virtual currency. The keys should be kept in a safe area where they cannot be hacked. If you leave the front door open while you leave the house, a thief may steal your belongings. It may make trading or investing in Cryptocurrencies easier if individuals are aware of the usual methods used by fraudsters.

Disclaimer - The author’s thoughts and comments are solely for educational reasons and informative purposes only. They do not represent financial, investment, or other advice.