The cryptocurrency has opened a lot of opportunities for investors to not only expand their investment portfolio but also gain more profit. It has also made itself a good platform for traders to practice and improve their analytical skills. However, the market has also made it possible for scammers to take people’s hard earned money. If you are new to crypto trading, here are the most common cryptocurrency scams you should watch out for:
These exchanges are sites that shut down or completely disappear on the face of the Earth as soon as they got your money. Unfortunately, the increasing popularity of cryptocurrencies comes with an increasing number of exchanges. This is a good thing because it gives traders more options. However, it makes it difficult for new traders to determine which exchanges are legit and which are not.
When choosing an exchange to get your cryptocurrencies from, you might want to start with the popular ones. Also, do not store your cryptocurrencies in an exchange whenever you are not trading them. You can transfer them in an offline wallet when you don’t need to use them.
Arbitrage Trading Systems:
While this may not entirely be considered a scam, marketers may dupe you into buying promises that don’t get fulfilled. These systems work by arbitraging prices between several exchanges. This seems like a good idea. However, withdrawal fees are quite expensive, which will take a lot out of your funds. Also, fulfillment of trade orders can take more than an hour, which can make arbitraging less profitable.
These systems can easily be avoided. Don’t easily buy into promises of making easy money. Also, it would help if you simply trade cryptocurrencies the way they should be traded. It can save you from future problems.
Initial Coin Offering (ICO) Scam:
An ICO is the launching of a new cryptocurrency to raise funds for a company. While this lets investors buy newly launched cryptocurrency affordable prices, this also puts them at risk of losing their money. Since they are unregulated, even shady companies can launch an ICO. An ICO scam works by simply launching a new cryptocurrency. Once the investors have put their money on the offered cryptocurrency, the scammers simply shut their company down and go into hiding.
Before buying coins from an ICO, do a background check on the company behind it. Since companies that do ICOs are mostly startups, you would want to do a research on the people behind the company. You would want these people to have good business reputations. Also, take a look at their business plan and check if it actually solves problems. This is to ensure that the company won’t close at any time of the day without returning your money.
General Tips for Safe Trading:
To further secure your hard earned money when trading cryptocurrencies, only spend the amount of money you are willing to lose. This way, you won’t lose much if you get scammed or if you got a losing position. Also, read exchange and company reviews before opening a trading account or buying cryptocurrencies. It can help you avoid scams.
By keeping these scams in mind, you can avoid losing your money and take profits from your cryptocurrency trades. Do not rush into an investment. Take your time and do a research before spending your cash.