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December 5, 2023

Stay Safe, How to Spot and Avoid Cryptocurrency Scams

Stay Safe, How to Spot and Avoid Cryptocurrency Scams
Katya Richardson

Written by Katya Richardson

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Cryptocurrencies are gaining ground in Australia, but with their rise, there’s a concerning surge in sophisticated crypto scams. These scams, which can be especially perilous for newcomers, come in various forms, from deceptive Ponzi schemes promising unreal profits to intricate phishing attacks aiming to steal sensitive data.

In 2022, Australians lost 221.3 million Australian dollars ($148.3 million) to cryptocurrency-based investment scams, marking a significant 162.4% increase compared to the previous year, 2021. This highlights the pressing need for increased awareness among the cryptocurrency community.

To safeguard your investments and personal information, it’s essential to stay informed about the latest scam tactics in the crypto world. In this article, we will discuss how to spot and avoid cryptocurrency scams.

Introduction to Cryptocurrency and Its Associated Risks

Cryptocurrency is a digital asset that you can buy with your phone, computer, or a special ATM. Famous ones include Bitcoin and Ether. Cryptocurrency uses a decentralised setup, which means they’re not under government or central authority control. Cryptos gained popularity due to cheaper, quicker money transfers and decentralised systems that don’t break down at a single point. However, this popularity comes with a mix of advantages and disadvantages of cryptocurrency that investors should consider.

The popularity of cryptocurrencies has also led to an increase in crypto scams. Scammers often try to obtain private information, like security codes, or deceive people into sending cryptocurrency to a compromised digital wallet. Examples of scams include giveaways, phishing attempts, extortion emails, fake company alerts, blackmail schemes, “rug pulls,” and may even involve fake mining apps or networks.

Cryptocurrency Scams and How to Identify Them

Understanding Common Cryptocurrency Scams

Scammers in the crypto scene are pretty clever. They’ll go to great lengths to trap you or get your personal info. That’s why many crypto scams involve impersonation and carefully crafted lies, tailored to their target. The most common crypto scams these days include:

  • Ponzi Schemes
    Ponzi schemes have sneaked into the world of cryptocurrency. They usually promise big profits by using money from new investors to pay off existing ones.
  • Phishing Attacks
    Phishing attacks are a significant threat to cryptocurrency holders. Scammers use tricks to make you reveal your private keys or login details. Stay alert, recognise phishing tactics, and use security measures to keep your assets safe.
  • Pump and Dump Schemes
    Pump-and-dump schemes manipulate cryptocurrency prices, leaving unsuspecting investors with losses. Be cautious and don’t believe sudden hype.
  • Malware and Ransomware Attacks
    Malicious software and ransomware constantly threaten your digital assets. Use strong security practices to protect your investments from these attacks.
  • Social Engineering
    Social engineering scams trick people into sharing sensitive information through psychological manipulation. Strengthen your defences, be cautious of suspicious requests, and safeguard your personal data.
  • Fake Wallets and Exchanges
    Fraudulent wallets and exchanges can put your cryptocurrency at risk. Do your research, verify their authenticity, and use reputable platforms to ensure your funds’ security.
  • Celebrity and Impersonation Scams
    Scammers often use celebrities to promote fraudulent schemes. Verify authenticity, be sceptical of promises, and don’t get fooled by false endorsements.
  • Fake News and Pumping Media: Distinguish Fact from Fiction
    Fake news and media manipulation affect cryptocurrency markets. Develop critical thinking skills, verify information, and avoid making rushed investment decisions.

Spotting the Red Flags: Identifying Scam Signs

When it comes to cryptocurrency scams, there are several obvious signals that you’re going to be fooled. Watch out for the following:

  • Lack of whitepaper: A legitimate cryptocurrency should have a clear whitepaper explaining its design and function. If it’s missing or unclear, proceed with caution.
  • Excessive marketing: Watch out for crypto promotions that rely heavily on aggressive online ads, influencers, or extravagant claims without evidence. For a balanced perspective, see how legitimate events like the Bitcoin Halving 2024 influence the market.
  • Anonymous team: Investigate the people behind a cryptocurrency project. If team members are undisclosed or hard to find, be wary.
  • Free money offers: Be sceptical of investment opportunities offering free cash or cryptocurrency.

Safeguarding Your Investments: Preventive Measures

Scammers are always finding new ways to steal your money using cryptocurrency. To steer clear of a crypto con, here are some things to know:

  • Protect your wallet: Keep your cryptocurrency wallet private and never share your private keys with anyone, especially not with firms offering investment opportunities.
  • Verify wallet app legitimacy: When using a cryptocurrency wallet app, initially transfer a small amount to confirm its legitimacy. If you encounter suspicious behaviour during a wallet app update, terminate the update and uninstall the app.
  • Invest in what you understand: Prioritise investments in cryptocurrencies you comprehend. Take the time to research and understand how a particular cryptocurrency works before investing.
  • Be cautious of social media ads: Exercise scepticism when encountering cryptocurrency opportunities on social media. Scammers often use celebrity images or promises of giveaways. Do your due diligence before trusting these ads.
  • Ignore unsolicited calls: If you receive unsolicited calls promoting crypto investments, it’s likely a scam. Refrain from sharing personal information or transferring money in such situations.
  • Download apps from official sources: To ensure safety, download cryptocurrency apps exclusively from official platforms like the Google Play Store or Apple App Store.
  • Research unfamiliar cryptocurrencies: Investigate lesser-known cryptocurrencies by reading whitepapers, identifying the team behind them, and seeking genuine reviews and testimonials. Consult a reliable fake cryptocurrency list to detect scams.
  • Invest responsibly: Never invest money you can’t afford to lose in cryptocurrency. Recognise the inherent volatility and speculative nature of the crypto market.
Cryptocurrency Scams and How to Identify Them

Conclusion: Staying Vigilant in the Cryptocurrency Landscape

Cryptocurrencies offer exciting chances, but you need to be careful and smart when dealing with them. In the world of crypto, there are two main types of scams: one where scammers trick you into sharing your account or security info, and another where they persuade you to send your cryptocurrency to a fake wallet.

To protect yourself, it’s essential to learn about these common scam methods and always be cautious when investing in cryptocurrency. So, remember, keep learning, stay cautious and choose carefully when it comes to crypto. Enhance your understanding by exploring how to invest in cryptocurrency, ensuring informed decisions in this dynamic field.

The information presented on this website is general information only. It should not be taken as constituting professional advice from the website owner – Hiddup PTY LTD (Hiddup). Any information regarding past performance and returns contained on this website should not be construed or interpreted as a prediction or opinion as to future performance and returns. Hiddup is not a financial adviser. All views and observations expressed by Hiddup on this website are for information purposes only, are general in nature and should not be treated as investment or financial advice of any kind.