Sun. Feb 25th, 2024
Escalating Risks of Cryptocurrency Fraud and Methods to Safeguard YourselfEscalating Risks of Cryptocurrency Fraud and Methods to Safeguard Yourself

Cryptocurrency is widely accepted across the world, and it is estimated that more than 420 million individuals are adopting it. The number keeps increasing.

Many are attracted to cryptocurrency for investing and trading purposes as it offers attractive returns on investments. The number of crypto users adopted exploded between 2021 and 2022.

The reason for the explosion in the number of crypto adopters was that when the entire world was under lockdown due to the COVID-19 pandemic, the entire world economy collapsed. Only the crypto market survived the harsh economic conditions.

Post-pandemic, when the entire world opened up, the global economy was still recovering, and the idea that countries might experience inflation was looming on everyone’s mind.

During the lockdown, many lost their jobs, and after reopening, there were not sufficient jobs available. Thus, for those who did manage to retain or get a job, the pay proved to be insufficient even to bring bread to the table. As a result, many sought multiple jobs to maintain their lifestyles.

It was the crypto market that managed to give good returns on their investments. Many think that investing in such a market will allow them to hedge inflation. As a result, the number of crypto adopters has been steadily increasing

The Cryptocurrency Threat

Everyone dreams of leading a lifestyle that they have always wanted to live; the crypto market is the answer to that. After the economies reopened and job opportunities became scarce, many people struggled to maintain the lifestyle they had before the pandemic.

The success story of the crypto market survived the harsh economic conditions and reached many on social media platforms and messaging platforms. Thus, many who lacked the necessary knowledge about cryptocurrencies started jumping on the bandwagon.

They were unaware of scammers who have been scamming many since the dawn of the internet. As a result, due to their lack of awareness, many became victims of elaborate cryptocurrency scams perpetrated by these scammers.

Reasons for the Crypto Scam Explosion

Desperate Individuals seek refuge in Cryptos.

As we mentioned before, although crypto scams were prevalent in the pre-pandemic period, they exploded in number as many people without knowledge of cryptocurrency jumped in, thus becoming easy prey for such scammers.

Lack of Guidelines Issued by the Government

The ambiguous guidelines presented by the government about protecting the financial interests of crypto users are one of the biggest factors that are exploited by scammers.

Although over a decade old, cryptocurrency has not been considered an alternative investment vehicle by the government. As a result, not only overseas scammers but even those in the United States exploit several crypto users.

Lack of Legal Action by the Government

Even though the government fails to take any constructive actions to protect the financial interests of crypto users, they do take legal action when scammers grow too big for their boots. However, these are rare cases where the government manages to seize huge amounts of crypto and subsequently return them to their rightful owners.

Other than that, the government does not take enough initiative to protect individual crypto users who lose their money in a cryptocurrency scam.

How do Scammers Manage to Lure in their Victims?

Unfortunately, many do not take care of their finances, even though they are the reason that we can lead our lives. Due to a lack of such awareness, many end up in a financial mess.

Scammers find it relatively easy to trap unsuspected victims through various means.

Unrealistic Returns

Scammers will lure in their victims through fake promises. Scammers take advantage of those who are desperate to improve their lifestyles. In their desperation, they fail to look for the red flags that keep popping up when these scammers introduce their “investment” scheme to them.

Fake Investment Schemes

Scammers impersonate financial advisors to lure in their potential victims. These so-called “investment” schemes are elaborate Ponzi schemes or pyramid schemes. These schemes work on the premise of robbing Peter to pay Paul.

Scammers promise “no risk and huge profit potential” investment schemes that have attractive returns. These schemes remain afloat as long as there is a steady supply of “Peters’.” Once the supply dries up, the entire scheme collapses, and scammers run away with a lot of money.

Fake Initial Coin Offering

It is common in the crypto industry for developers to create and release cryptos through crowdfunding. Since blockchain technology is expensive and requires experts who intend to revolutionize the crypto world, it attracts a large crowd who are ready to invest and enjoy a slice of success when that crypto grows in price.

After observing the success of Bitcoin, the first cryptocurrency, many regretted the fact that they had failed to invest in it when each coin was cheaper than dirt.

When a new coin is to be released, many anticipate that it will be appreciated, like Bitcoin. Scammers take advantage of such factors. They may promise cryptocurrency but run away after collecting the money through crowdfunding without delivering on their promises.

Pump, Dump, and Rug Pull are Common in the Crypto World.

Many scammers are known to pump and dump cryptos and even rug-pull their audience, making huge amounts of money and leaving their audience with worthless crypto.

Fake Airdrops

It is common in the crypto industry to give away cryptos as a strategy to popularize their cryptos. Many scammers create fake accounts that are similar to celebrities’ social media accounts and make a fake promise to provide a certain amount of crypto in exchange for another one.

Why is Cryptocurrency Popular with Scammers?

The crypto market is highly unstable with its inherent volatility; thus, such volatility attracts even traditional retail investors as their market allows ample opportunities to make huge amounts of money. Thus, the crypto market attracts a lot of attention and pulls in many

Besides this, several advantages of cryptocurrency become disadvantages for the victims of an elaborate cryptocurrency scam.

The Digital Currency

Cryptocurrencies are digital currencies, and all you need is a device to operate them. Scammers can hack into their victims’ crypto accounts and wipe away their crypto holdings. Thus, cryptographic accounts are frequently subjected to such cyber-attacks.

Irreversible Transaction

Unlike your bank transfer or credit card swipe, cryptocurrency transactions are irreversible. When one needs to send cryptos, they use their private keys to send them to the intended recipient’s public address. Both of these keys are strings of alphanumeric characters. Thus, any addition or deletion of a character in the intended public key will result in sending those cryptos to someone else. Thus, these cryptos cannot be retrieved.

Decentralization in Nature

For any bank transfer, before the actual transaction occurs, the central bank will verify and authenticate both the accounts, the intended recipients, and the senders. Cryptocurrency utilizes decentralized networks. Thus, there is no single entity that would be responsible for verifying and authenticating cryptographic transactions.

As a result, it is the sole responsibility of the sender who intends to send their cryptos across.

Anonymous Users

Crypto users have their identity protected as their private and public keys are made of alphanumeric characters. Thus, one needs their keys to identify the sender or the recipient. As a result, it is challenging to find out the real identity of the sender or the recipient.

How do you Protect Yourself from a Crypto Scam?

You can be assured that you do not fall for a crypto scam if you consider the following steps:

Keeping Yourself Updated with the Latest Crypto Development

Believe it or not, social media platforms can be your best source of information. Several cryptocurrency scams perpetrated by scammers online find their way onto blogs, articles, news, and other social media platforms.

While Buying Cryptos

One of the most preferred ways of scamming people is through the use of wire transfers. Wire transfers are quite popular with scammers. It would be ideal if you were to make any transfer of funds while purchasing cryptos using either a credit card or bank transfer since both of these services can be traced. Thus, in the event of a scam, you can be assured of getting your money back from the scammer.

Adding Extra Security Features

Although it might prove to be a headache if you have multiple authentication factors while accessing your cryptos, it can prove to be a very useful deterrent against any hackers or scammers trying to wipe away your crypto holdings.

Alternatively, you could invest in a hard crypto wallet. Many hard crypto wallets are available and can store your cryptos without the need to store them on a crypto account with a crypto exchange.

However, while purchasing a hard crypto wallet, you need to research them and try to buy a brand new hard crypto wallet since many scammers sell refurbished hard crypto wallets at a competitive price. These wallets are rigged by scammers and can get hold of your crypto holdings.

Final Thought

One of the best ways to keep scammers at bay is to go through the internet and research topics related to cryptocurrency scams. The more aware you are of scams pulled by scammers, the better your chances are of falling victim to them.

By Admin

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