Cryptocurrency is valuable as a mode of payment, a store of value, and a revolutionary thing in itself. However, its volatility and susceptibility to scams have made it a tricky road to hike. Bitcoins are increasingly being accepted everywhere, but their extreme price volatility makes them harder to be trusted as a store of value.
Cryptocurrency is rife with criminal activity since transactions can be anonymous, and it is challenging for law enforcement to trace the one behind the transactions. Many bitcoin exchanges have witnessed spectacular heists or frauds, Initial Coin Offerings being the most popular form of cryptocurrency scams.
Bitcoin is believed to be a gigantic pump-and-dump scheme, the one that the world will not be able to recover from, and for good reason. It is believed to be a massive gambling front due to its lack of regulation and the entry of many fraudulent cryptocurrencies. Plus, there are bad actors at play as with any other market.
While Bitcoin is a revolutionary financial market, it has not been exempted from major scams.
The market is thriving with pump-and-dump bitcoin scams where promoters “pump” up the price of a security, which creates a speculative frenzy, and then “dump” their holdings when the prices reach artificial highs. Moreover, some cryptocurrencies are simply frauds. Nearly 10 percent of the money raised for ICOs has been stolen.
The ones unable to make profits in the market are simply labeled as ill-informed buyers acting on their greed to make quick bucks. But that’s not all. Even the best of us can get trapped in a scam resulting in a massive transfer of wealth from ordinary families to scammers.
Hackers are gearing up to scam people. Remote hacking is increasingly being focused on stealing bitcoin by commandeering other people’s computers to mine coins. Ordinary buyers also tend to go ahead and defy the law. According to the tax law, every sale of cryptocurrency has to be recorded as a capital gain or loss, and most bitcoin sellers fail to do so. Hence, the IRS recently made one of the major exchanges produce records of every big transaction.
You need to understand that you cannot simply trust your life savings with something you have not researched about thoroughly. You should rationally invest the amount you can afford to lose instead of hopping into the frenzy simply because some famous investors have made millions off of it.
Be wary of misleading and fraudulent schemes.
Understand the risk. Virtual currency trading is speculative and volatile, whether it is a bitcoin scam or not. The value can rise from hundreds to thousands, but it can fall just that easily.
Don’t give in to the pressure of buying right now. Scammers will try to create a sense of urgency to get you to put money in some “hot cryptocurrency”– don’t. Check out the dealers in virtual currency options or futures contracts before putting in your money. You should also run an online background check before trusting an asset.
Research any virtual currency platform or digital wallet provider before putting in any credit card information, wiring the money, or giving out sensitive personal data. Read any agreement you are signing with a digital wallet provider carefully. They might not take responsibility for replacing your money if theft occurs, unlike banks and credit card companies.
Don’t put your money in a virtual currency if you are not sure how it works. Put in your money only if you are ready and can afford to lose it. Don’t trust strangers off the internet who force you or coerce you into buying a virtual currency. It can be anyone, an anonymous tipster you came across on social media, or a romantic partner you met on the internet.
Don’t give in to threats over bills or promises of a giant reward and make cryptocurrency payments. Government agencies and legitimate businesses do not make it mandatory for you to pay in crypto. If you are being asked to do so, it is a scam.
Do not trust individual retirement accounts that claim to be “IRS approved” or “IRA approved.” While there are some self-directed IRAs that allow you to invest in virtual currencies, the IRS does not approve or review IRA investments. Keep your “private keys” secure, and do not share them with anyone.
A bitcoin scam can also look like a stranger messaging about a virtual currency investment opportunity with no risks and guaranteed profits. Or it can look like a call, text, or email that claims to be from the government or some official body seeking a crypto payment for a bill, debt, or fee.
Bitcoin and cryptocurrency, in general, is a volatile world to dabble in, and if you add scams like these to it, it makes you and your finances all the more vulnerable. So be wary if a caller, love interest, organization, or anyone for that matter coerces you to deal in cryptocurrency; it is a scam.