How Not To Get Scammed In Crypto; Warnings And Risks You Need To Know
Ask a random person about cryptocurrency and they still might tell you that it’s a scam. Some might still even say it’s for criminals. While cryptocurrencies are obviously not a scam, that doesn’t mean that scammers aren’t out there trying to steal your money. This article will go over a few of the ways that scammers try to trick you into giving them your crypto and also some other risks and warning everyone should know about if they are involved in crypto.
There are a few things you should look out for when dealing with keeping your crypto secure. These are;
- The high volatility of the market
- Pump and dumps
- Security threats
- Psychological factors
1. The High Volatility
There are unpredictable highs and lows when it comes to crypto. The reason behind this is whales. No, not the sea creature; but people or groups of people with tens of millions or hundreds of millions of dollars worth of crypto. Whales basically control the market. When they want it to go up, it goes up. When they want it to go down, it goes down. Now, this does not take away or void things such as technical or fundamental analysis. Those are still great ways to make money with crypto. With saying that, you need to be aware of whales and their ability to move the market however they want. It is commonplace for the price to move up 5–10%, consolidate for a few hours, then dump right back to its starting position. Sometimes the price will even wick upwards 2%, immediately wick downwards 4%, then move back to its original price. This is why I prefer to pay attention to larger timeframes and play market cycles and bigger trends. Some coins have under a million dollars worth of circulating supply. It would not take much to move such a coin. The further away from the “majors” (Bitcoin, Ethereum, XRP) you get, the greater the volatility.
Speaking of coins with under a million dollars worth of circulating supply… these are what are knows as “shit coins.” Bitcoin maximalists like to refer to every coin other than bitcoin as a “shitcoin.” Personally I believe that many cryptocurrencies are useful and will continue to be players in the crypto space. On the opposite side of that equation, the vast majority of cryptocurrencies today are most likely coins with no real value that serve no real purpose and will continue to bleed until no one trades them at all. These are known as “shitcoins” and this is the reason why it is imperative that you DYOR (Do Your Own Research) on every coin you buy. Anyone can create a cryptocurrency, so make sure that the coins you buy are legitimate.
3. Pump And Dump Groups
The idea behind a “pump and dump” is that if enough people buy a coin, then the price will move up, and when people outside of the group see that, they will FOMO in and raise the price even more. At that point, the original “pumpers” will sell, leaving everyone else in the dust.
A big problem with this is that usually only the insider’s insiders, as in the very few people who actually own the groups, make money with this. That’s because they buy the coin well in advance before telling anyone about it except maybe their close friends. Then they tell the “inside group.” Then they tell the main group. Then the main group people will buy the coin that the insiders already bought days beforehand. When it starts to pump, the people who bought beforehand will start to sell.
Even if you get in before it starts to pump massively, you have to pray that everyone else in the group doesn’t pull out early leaving you hold the bags.
Stay away from pump and dump groups.
When dealing with cryptocurrency you want to be as secure as possible. Here’s a list of things to do:
- Having secure emails
- Having 2 factor authentication set up
- Having hard to guess passwords
- Changing your passwords often
- Having different passwords for every exchange and email
- Making sure that you are visiting the legitimate websites and not getting phished (phishing is when a scammer creates a website that looks identical to the one you want to visit, yet changes a little letter in the name, and steals your information, i.e. Binance.com (real) vs Bińance.vom (fake). This was a real phishing site that hacked people’s funds by the way, so don’t go to this fake one.
- Never send any crypto to anyone asking for it, especially if they promise to give you back more than you give them. If you see this on twitter and it looks like it is sent from a head figure, check the follower count of the person. Usually they’ll only have a few hundred or thousand. Even if they have more, still, don’t ever give away your crypto.
5. Psychological Factors
Cryptocurrency is real money.
Let me say that again…
You are spending real money, losing real money, and earning real money when you are dealing with cryptocurrency.
Cryptocurrencies are easy to get caught up in. Just like how people forget that credit cards are real money and wrap up massive amounts of credit card debt, you can also rack up debt in cryptocurrencies. This is especially true if you use your credit card to pay for cryptocurrencies. Just because everything is online it might not seem real, but it is. So you need to treat it with the same respect that you would treat cash. Don’t let the addiction get ahead of you. And set limits for the amount of money that you will gamble with. Yes, investing into cryptocurrency is still a gamble. It’s probably the best gamble out there right now, and has an incredibly good chance of working out well, but, ultimately, it still is. So don’t get caught up in that cycle of losing money and putting more money in and losing that money over and over again. If you find yourself doing that, learn to trade crypto so you can protect your capital and actually make some profits.
And remember the number one rule; only invest what you are willing to lose.
Finally, there has been a scam going around where people (mostly Indian), will call victims up and claim they are from the IRS and that they need to pay them in bitcoin. If anyone from any government agency, exchange, or literally anything, calls you up and tells you that you need to pay them in bitcoin or cryptocurrency, hang the phone up immediately. They will tell you that you will get in trouble if you hang up. You won’t. Just hang up and block them. Report them if you want.
And that will do it for this post.
If you know anyone who would benefit from knowing these risks and warnings, please send this to them.
And if you or anyone you know is interested in knowing more about cryptocurrencies, you can sign up to the free crypto course at free.cryptolete.com.
Founder of Cryptolete.