5 Common Crypto Scams and How Best to Avoid Them

5 Common Crypto Scams and How Best to Avoid Them

5 Common Crypto Scams and How Best to Avoid Them

Crypto offers world and life-changing opportunities if you make the right investment decisions and research them carefully.

However, with so much promise in a growing industry, investors are bound to come across a few scams throughout their crypto experience.

The key to ensuring you have a positive crypto journey is knowing how to spot and avoid scams as much as possible. That\s what we want to help you with in this article.

Today, we’re looking at five of the most common crypto scams and how to avoid them.

Rug Pulls

Let’s start with one of the most common that everyone is bound to come across.

When crypto developers abandon a project but pocket the monies obtained from investors, this is known as a rug pull. To attract investors, bad actors can issue a new token on a decentralized exchange, couple it with a legitimate cryptocurrency, and generate buzz on social media. The developers scrap the project and run with investor funds once enough money has flowed into their token.

This scam targets early investors who believe they are obtaining early access to new cryptos when, in reality, they are being defrauded of their funds. If it seems too good to be true, it probably is.

How to Avoid Rug Pulls

Before investing your money in any crypto project, always conduct your own due diligence and checks.

Another approach to avoid getting your rug pulled is to only buy cryptocurrencies from reliable, centralized crypto exchanges.

This is due to the fact that coins undergo severe inspections by the centralized exchange to ensure that they are genuine. It's unlikely that they'll be dragged under the rug.

ICO Scams

The crypto counterpart of a stock's first public offering (IPO) is an initial coin offering (ICO). Companies can use an ICO to raise funds for a crypto project, such as a token, software, or relevant service. The investor receives a new issuance of coins in exchange for pledging funds.

While IPOs are traditionally reserved for well-established private enterprises, companies that pursue ICOs aren't in the same boat. They could be brand-new businesses with no track record, making it impossible to tell the difference between a legitimate service and a scam. ICO scams, like rug pulls, take money from early investors only to quit the project soon after.

How to Avoid ICO Scams

Examining the company's whitepaper is an easy method to spot an ICO scam or simply an unprepared management team. This document outlines the project's specifics, including its market analysis, strategy, and goals. It's a red flag if the corporation doesn't produce a whitepaper.

Phishing Sites

Some sites may seem genuine when you visit them, only to realize late on that they’re actually scams to take your valuable crypto from you.

You’d probably enter your information if you aren't informed, or if you think the website has recently undergone an upgrade or design change. The phishing website's hackers or scammers can then grab your information, log into the legitimate website, and extract all of your funds.

There are a variety of phishing websites out there that are aimed at investors who are new to crypto or are unsure of what they're doing. 

Always be cautious when using cryptocurrency-related websites or services, as you never know when your wallet will be compromised.

How to Avoid Phishing Scams

Always double-check and triple-check the website address before entering your information.

If you're unfamiliar with a project's website, get the URL or website link from an official source, such as the project's Twitter account or a Reddit thread. You can also rely on reputable websites such as CoinGecko or CoinMarketCap. Official links from these platforms are usually secure.

Pump and Dumps

Pump and dump schemes are a type of market manipulation that is carried out in a coordinated manner.

A group will entice its members to purchase a particular currency at a specific moment. The price of coins with minimal liquidity will rise quickly. It is hoped that non-members of the club will also purchase the currency.

While the public is pumping the coin, the leadership is selling coins that they already had or had purchased prior to the synchronized pump. They deceive everyone in the group into believing that as the price rises, people from outside the group would begin to buy.

In practice, the pump dies practically as soon as the group gets started since members try to leave as soon as they make a profit.

How to Avoid Pump and Dumps

It all comes down to credibility when it comes to spotting a pump-and-dump strategy. Look out for anonymous accounts with little posting history — or a history of spurious pumping — if you utilize social media platforms like Reddit and Twitter to watch bitcoin movements. These are most likely con artists.

Social Media DM Scams

If you've been in crypto for a while, you've probably come across telegram or discord scams.

Scammers usually send you a direct message (DM) on Discord, Telegram, or Twitter. They'd come in the guise of an 'early' announcement, alpha, or even links to a phishing website that looks like a project you're interested in.

The scammers will take your cryptocurrency if you follow their links or advice and deposit it with them.

How to Avoid DM Scams

For links and updates, always check the official accounts.

If strangers message you and offer you 'alpha' or 'exclusive money-making secrets,' be skeptical. It'll be a scam 99 percent of the time.

There is no such thing as a free lunch in this world.

Invest in a Genuine Crypto Project

One project that’s definitely not a scam is ADA Ninjaz. It has a vibrant community, a lot of utility, and organic growth.

It entitles you to the following advantages:

  • You get to select how the plot evolves in this community-driven manga series.
  • A forthcoming anime series that the entire globe will be able to enjoy and fall in love with.
  • A one-of-a-kind soundtrack that you may contribute to.
  • And so much more...

Get your own ADA Ninjaz NFT on the secondary market, or join the Discord community to learn out when the next mint is.