Cryptocurrencies have perhaps been one of the most highly-sought investment options in the last few years, owing to the large price rises that we have seen in various cryptos, as well as the general interest in cryptocurrencies and the potential that they bring to disrupt the monetary systems in place in the world today. While some investors believe that cryptocurrencies are a bubble and are destined for a huge fall in price soon, others think that they represent an investment into the future of money. In either case, the attention and money that cryptos have been attracting have also brought in a number of people looking to defraud people and take advantage of the exciting and uncertain nature of such investments.
Thereby, it is important to take note of some of the common scams going around in crypto circles, as well as ways to keep oneself protected against them. Many specialists recommend that people stay attentive in terms of their investments and their value, and take notice of any sudden fluctuations in value, or any other suspicious price movements or behaviour.
Initial Coin Offerings (ICOs) are the means for new cryptocurrencies to raise funds. Investors in ICOs receive tokens, commensurate in value to their investment. These are some of the most common ways for fraudulent operations, as many ICOs have no real business plan or technology behind the offering, and are launched by people with no experience of the industry. Often, new coin offerings will have unrealistic or unsubstantiated claims about their products and services. It is telling that Jordan Belfort, the infamous ‘Wolf of Wall Street’, has described ICOs as the biggest scam ever.
There are also thousands of unregulated online exchanges and brokerages for cryptocurrency trading, which can quickly run away with investor money. Many of these will make it extremely difficult for investors to withdraw their money once they deposit, or will charge very high withdrawal fees and commissions. Another way in which fraud is done is by offering automated trading systems, with the promise of arbitrage between different exchanges. However, the reality of bitcoin trading, or any other cryptocurrency trade, is that most exchanges have hefty withdrawal processes, and high fees for trading crypto with fiat currencies, while trades can also take hours to complete, wiping out any potential arbitrage profits, and may even lead to losses.
Scammers have been focusing not just on individual buyers and investors, but also on large industries where cryptocurrencies are used. Casinos are one such sector where cryptocurrencies have become quite popular, and so the cybersecurity department from the Winz.io online casino warns that users should be very careful when making crypto transactions, and avoid doing so if they believe that some suspicious behaviour is taking place.
Thus, it is important to take note of some rules and ideas to keep in mind while trading cryptocurrencies in order to stay safe. Crypto itself is a high-volatility asset, and so there is no low risk approach to investing, but at the same time, investors need to protect themselves from fraud.
Investors should only invest that which they can afford to lose, since cryptocurrencies are more volatile than traditional assets. At the same time, investors should do their research into the various brokers, exchanges as well as the crypto asset itself before depositing money. There are new developments in the industry almost on a daily basis, so staying informed is vital. A useful tip to stay safe, especially if one only wants to trade on the change in price of the cryptocurrency, and not invest in it, is to use Contracts for Difference (CFDs). These are financial derivatives which allow investors to speculate on the price of assets, without actually owning the underlying asset. CFDs are regulated financial products, which means that investors’ money will be protected from fraud, and there are a number of reputed brokers and exchanges which offer crypto CFDs. They also have risk management tools such as stop losses for investors to limit their losses if they so desire.
Thus, crypto investors have some options in place to ensure that they are able to safely trade and invest in cryptocurrencies.