Long gone are the days where cash was the only means of currency. Nowadays, with the increased uses and benefits of technology, it has also been possible to develop digital monetary systems, popularly known as cryptocurrency. This method of exchange, allows individuals to complete secure transactions and keep money without using their name or going through a bank.
However, as with everything else, there are some risks associated with this novel approach to exchange, as malicious individuals take advantage of the system in order to con people who are not knowledgeable in this area and may easily fall for scams.
Therefore, you want to be able to recognize when something is too good to be true and is a potential risk as this can have serious negative impacts on you, such as financial loss. In this article, we will discuss some of the existent crypto scams, how to recognize these, and advise of some mistakes every crypto trader makes.
What Types Of Crypto Scams Are There?
Fake Mobile Apps
Many fraudsters develop fake cryptocurrency apps that you can download onto your mobile phone. It can be easy to fall for this if you do not conduct your research properly, and many people fall victim to this scam. Take a good look at the app, and look for details such as strange coloring or grammatical mistakes, as these could be indicators that the app is fake. You can usually easily find the reviews for every app online before you download it – read these to check what other people are saying about it.
If you are at all familiar with social media and the internet world, you will know that not everything you see is truthful or real. Just like many people create fake celebrities accounts, they also create impostor accounts on different online platforms. Be mindful not to be following these accounts as they can be easily mistaken for the real deal. Owners of these accounts often ask you for cryptocurrency, and you will never get it back.
Email marketing is on the rise, and you will surely receive hundreds of different emails every month, from different companies offering different products and/or services. This includes emails from cryptocurrency companies, even illegitimate ones.
These emails often use the information of legitimate crypto companies to extort money from naïve customers. You should not reply to emails or invest your cryptocurrency without fully checking the legitimacy of the company and the email address contacting you.
The cryptocurrency industry is full of shadow exchanges that become available and vanish very quickly. You must be wary of these exchanges, as they can ask you to invest your money, which you will most likely lose, or they will require you to pay large amounts in commissions. These exchanges can be difficult to spot as they make sure they are attractive for beginner traders to use their platform – not adding any charges for transactions, for example. As an alternative, they produce their income by charging a fee to place a token (including falsified ICOs) on their platform, without giving appropriate trading liquidity for people to buy or sell tokens freely.
What Signs Should I Look For?
Promise Astronomical Gains
In the majority of situations, if it sounds too good to be true, it is because it probably is. If you are being promised a high return, this is often an indicator that it is a scam.
You Have To Invite More Users
Some crypto trading scams will try to incentivize you to spread the word in order to get more people to join. This is a clear red flag that this is a malicious scheme. All forms of trading are voluntary and no one should be pressured to take part in it.
They Ask For Your Private Passwords
This can be an obvious one for those more aware of risks associated with using the internet, however, some people are more vulnerable to these crypto scams and to give their passwords and other private information when asked. It should go without saying that a legitimate trading platform will not be asking you for this information and if they do, steer clear without disclosing any details.
The best way to predict future behavior is to look into the past. If a company has previously been associated with scams, it is very likely that they will try to do it again, therefore do not engage with them.
It can be easy for people to simply visit the trading company’s website in order to check its legitimacy. Investing your money is serious, and you should take the time to look into the company before as well as the team members. Most companies will have different platforms and develop a large online presence to be recognized. If they do not, it is usually a sign they have something to hide.
Common Mistakes Every Crypto Trader Makes
People often get into crypto trading through word of mouth and they believe they can make large amounts of money investing in this way, therefore they do it quickly and without thinking. Any type of investment needs to be carefully considered in order to avoid financial loss. There is so much information online, and some can be false, but there is also a lot of truthful information you can easily learn from. Additionally, there are also many reviews available on the different crypto trading platforms, similar to the one provided by the folks at insidebitcoins.com, where you can fully learn about crypto trading. You will want to avoid being impulsive and conduct your own research so that you fully benefit from crypto trading.
Stop Loss/Take Profit Placement
One of the most common mistakes by crypto traders is that they put themselves in a position where they have not placed a stop loss and take profit orders. Failure to do this can result in complete financial loss.
Always Avoid Overtrading
Even though it may be very enticing to physically close all of your positions when you have made a profit or taken a loss, the most appropriate method is to maintain your original position and put your trust in your stop loss/take profit orders, as discussed above. Overtrading is something beginners usually do, and there are many associated risks. There is no need to constantly monitor your positions, let your methods do the work.
Putting Too Much Money In Too Soon
As a beginner, you may be tempted to put in a lot of money, but you should never invest more money than you can afford, as this will result in serious financial difficulties. You will still be learning therefore make yourself familiar with this type of trading and efficiently manage your money.
Investing in cryptocurrency can be a complicated journey and one that requires patience and knowledge. This is particularly important so that you know to recognize and avoid crypto trading scams that make you lose your money.