A common assumption among the millennials these days is that investing in cryptocurrencies is a get-rich-fast formula. This generation that already preferred electronic trading platforms is further mesmerized by the too-good-to-be-true advertisements for cryptocurrency and Initial Coin Offerings (ICOs). They want to be the first to get to the next big ICO to spend money frivolously in the hope of doubling or tripling it fast. This has created a situation for scammers to take easy advantage from. The trader greed has become an opportunity for scammers to sell dubious products and services in the name of cryptocurrency.
Here are some of the ways these scammers operate.
Initial Coin Offerings
An ICO or Initial Coin Offering is a fundraising event for the launch of a new cryptocurrency. Those who participate and invest in an ICO receive tokens to distribute among individual investors.
Some ICOs are genuine and can be a good investment opportunity, but many are a great scam. If investigated a bit, it wouldn’t be difficult to discover that these scammers have neither used any technology for coming up with their cryptocurrency, nor prepared any practical business plan to proceed with once the event is over. Some of them just get launched with a group of individuals holding a white paper, with no prior experience in the crypto industry or tech sector. They also make ridiculously unviable claims about their products. This is why, in September 2017, China placed a ban on all so-called Initial Coin Offerings.
According to Enrique Dans, a featured writer and contributor to Forbes, cryptocurrencies are “problematic to use”.
Unregulated Exchanges and Brokers
There are so many unregulated brokerage firms and online crypto exchanges nowadays that it’s even become difficult to keep count. They all offer cryptocurrencies and sell other related trading products. Many of them are a scam. After you deposit your money, they will charge you hefty amounts as commissions, or simply kill you with a stringent withdrawal policy that won’t allow to take your money back in any instance. The worst ones are those that directly steal the money and disappear.
Trading Systems for Bitcoin
This is about those automated Bitcoin trading systems that claim to support live market data and allow you to execute crypto orders via pre-built algorithms. Promoters of these systems declare that traders can beat the market price through arbitrage among different crypto exchanges. Well, do you believe that?
Bitcoin exchanges will usually charge high amounts if you want to trade your Bitcoin for fiat currency (euros, dollars, pounds etc). This will nullify any profit you make out of the Bitcoin arbitrage anyway.
So what do you think? Are you cryptocurrency scam-proof?
My advice is if you want to get into the crypto world, only invest an amount that you can afford to lose. After all, it’s always good to exercise caution when trying out something new!