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Crypto currency scams have unfortunately become quite common and investors are losing millions of dollars every day to fraudulent operators. With the promises of incredible profits, scammers have become better at disguising their scams until it’s too late for the investors. With regulatory authorities struggling to keep up with the fast-changing cryptocurrency industry, investors really have no one to protect them from the crypto scams. This makes it imperative for investors to learn the red flags which they can use to spot a cryptocurrency scam from a mile away.
The 5 warning signs for spotting a crypto scam include:
The team behind it is mysterious
We all love a bit of mystery but when it comes to cryptocurrencies, mystery almost always spells trouble. Some of the biggest cryptocurrency scams have been perpetrated by developers who failed to provide sufficient information about themselves. Some flat out lied. A cryptocurrency should have a trustable team whose previous positions are well documented for all to see. While this is not a guarantee that you will not be scammed, it goes a long way in showing the intent of the developers.
The whitepaper is shallow or plagiarized
This is the most certain telltale sign of a scam. A whitepaper documents the vital facts about a cryptocurrency. This includes details such as the technology behind it, the problem being solved and a roadmap to achieving that. Cryptocurrencies which plagiarize whitepapers expose the fact that they don’t have anything to offer. Often they are just capitalizing on the hype in the market to get away with people’s money. While the technical terms may elude you, reading through the whitepaper is crucial. This means you can judge the prospects for yourself.
The crypto guarantees insane profits
We all love to make money, lots of money and this is what many scammers have exploited to get money from unsuspecting investors. With the cryptocurrency market having surged to unprecedented heights, the promises of insane profits was easy to believe. However, one should be very wary of any cryptocurrency that guarantees profits. This is because the cryptocurrency industry is very unpredictable and highly volatile and anyone who guarantees you profits is most likely just trying to lure you into a scam.
The team gives investors a very short window to invest
Crypto scammers are intelligent people who capitalize on people’s fear of missing out on a possible opportunity to make insane profits. They therefore create a lot of hype through aggressive social media and mainstream media campaigns. These campaigns get people excited and scammers count on that excitement to mislead people. Most crypto scams give investors a very short period to stake their money during which one is unable to fully scrutinize the crypto and uncover the deep issues.
The crypto is not solving any problem
Cryptocurrencies should solve real-life problems. For instance, Ripple is easing funds transfer. Bitclave is changing the online ads industry. Ethereum’s smart contracts are transforming insurance, supply chain management, legal services and many more industries. These are just a few examples of cryptocurrencies solving real problems. Cryptocurrencies that don’t solve any problems are likely to be scams. The real value of a cryptocurrency stems from the value it creates in real life and the solutions it offers.
These are just a few of the red flags to look out for. Regulatory authorities are yet to formulate policies that fully protect investors and therefore, one must arm oneself with the knowledge to avoid scams. On a lighter note, one should also consider the name of the cryptocurrency before they invest in it. Those who invested in a cryptocurrency called Ponzicoin have nobody to blame but themselves when they lost their hard-earned money to the Ponzi scheme.
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