Whenever there is a lot of money to be made in a new industry, there are criminals ready to take advantage of people. The cryptocurrency market is nascent and largely unregulated, which makes it highly susceptible to fraud.
In this post, you will find three common bitcoin scams you need to look out for and avoid in 2019.
Fake Plug-and-Play Bitcoin Trading Software
A guaranteed return trading bitcoin should be an oxymoron because the price of bitcoin is highly volatile and it is difficult to predict the future price.
However, certain crypto-related trading platforms have often promised to generate guaranteed profits by trading bitcoin on behalf of their users. These trading companies often claim to have a novel strategy or some highly efficient trading bots or algorithm. All these promises often point to a scam. A prime example of this would be Bitcoin Loophole.
Sometimes some self-acclaimed professional bitcoin traders on social media claim they have been trading on a platform where they are earning guaranteed daily returns, but you will have to pay an initial deposit to gain access to the trading engine that you will likely never see again.
Fake Cloud Mining Platform
Bitcoin cloud mining is genuine. It allows users to mine bitcoin without the need to manage hardware, bitcoin mining software or deal with network issues themselves. Mining is the way new bitcoins are extracted, but it has become a resource-intensive activity as it requires massive amounts of processing power and electricity, and thus money. Cloud mining is an effective way of pooling funds together to bear the cost of mining new bitcoins.
But scammers have found a way to exploit this, with a lot of people buying cloud mining contracts in companies that do not even possess mining hardware. Some firms make audacious claims regarding their returns without transparency about exact costs leading to losses when the price of bitcoin dips. Other are simply Ponzi schemes. A good example of a Pyramid scheme disguised as a cloud mining company is AWS Mining.
It is essential to examine cloud mining opportunities objectively, understanding the risks instead of focusing on a platform’s claimed returns.
ICO Exit Scams
This scam is one of the grand schemes among the many notable tricks in the ICO space.
In the case of exit scams, new companies make a significant measure of publicity around their new cryptocurrency, luring many investors to buy the tokens. They seek investments for an “exciting” new cryptocurrency project, only to make off with investors’ funds without ever launching. Most of these companies also entice speculators with a promise of making ridiculous returns on their investments.
Pincoin, one of the most popular exit scams, made away with 660 million dollars from 32,000 different investors. It was offering 48 percent monthly returns for investors.
The simplest way to avoid any of these scams is always to do your research and deal with facts only rather than making decisions based on promised returns or the hype surrounding a token sale.