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Beware of scams in crypto trading and learn how to avoid them

Crypto trading is a lucrative business venture, and just like others like it, scammers are preying on honest investors. You can always stay in regulated markets where it’s safe, but the unknown is where big opportunities lie waiting. Fortunately, there are ways to detect and avoid them; you only need to know where and what to look for.

If you are a trader seeking ventures with the potential for big profits, you must prepare yourself against scammers. Learn what they are, how to detect them, and how to avoid them when you read this article at Sportsbet.

What is a crypto scam?

A crypto scam can come in many forms, but they are all described as acts of deception aiming to steal your valuable digital assets. Bitcoin (BTC), Ethereum (ETH), Tether (USDT), and Dogecoin (DOGE) are some of the first targets of this crime. Thanks to cryptography, these assets are 100% safe from hackers, forcing cyber criminals to target investors like you instead. 

Scams aim to manipulate you into making mistakes, like sending your assets to the wrong address. Some make pages disguised as some of your favourite websites, while others will directly interact with you like a salesperson. 

Different kinds of crypto scams 

A variety of scams tried over the years have been identified. Victims and witnesses alike have generalised many of them into several categories to properly describe them to others. Many scammers are creative enough to avoid making the same strategy, but what you learn from others’ mistakes will help guide your intuition and logic. 

Learn the following kinds of scams and be wary of their signs:

Phishing scams

This is one of the simplest strategies because it requires no social interaction, and the tools needed to pull it off are accessible to almost everyone. Phishing is a combined word between phreak, which means to hack into telecommunication systems and fishing, the recreational activity of laying bait and waiting for a bite. 

Most of the time, it’s an input box disguised as a platform you trust waiting for you to type the information it wants. Giving away your name and password is enough to surrender control over your account. Crypto traders are safer than others because wallets have extra protective layers if you fall for such a trap. The best example is the non-custodial setup where the scammer can access your wallet account, but your private keys are safe in your device. 


This is a dangerous crime because to make it work; the scammer needs to know who you are. They can have your home address, name and phone number or those of the people you love. Blackmail will usually involve incriminating evidence of your secret. A personal example includes private or sensitive photos, but most of the time, it’s business-related, like the blueprint to a project you don’t want competitors to copy. Likewise, they can threaten you with physical harm because they know where you live or work and demand cryptocurrency as payment to avert that. 


Rug pull scam

Rug pull scams start as promising investment opportunities with big promises to make you a millionaire in the future. Such a promise tends to be elaborate with a roadmap, directions for the project, and several employees to make it work. This is one of the most hurtful scams because falling for it can ruin your pride. 

Once investors are hooked and they’ve sent their deposits, the scammer pulls the rug from under them. This means that the project is revealed to be nothing, and the scammer just walks away with all the funds. 

Likewise, it can also be hyping up a volatile asset so the scammer can sell them to you and then let it drop in value once they get their profit. This is also called a pump-and-dump scam because they manipulated the cryptocurrency’s value to entice investors. It’s easy to pull this off in a niche cryptocurrency where they only need to trade the asset between wallets they control. If the market rate drops, the scammer has stopped circulating the assets.

Ponzi scheme

Like a rug pull, the Ponzi scheme is an elaborate project enticing investors to join. The difference is that the product or system you paid to join is functional. Joining costs real cash, and you can earn money as an active member of its systems. The problem is that it relies on a consistent stream of newcomers joining the economy.

A Ponzi scheme or pyramid scheme is a type of scam where older investors profit from the buy-in fee paid by new investors. This can be disguised as a collectable game where you buy assets to join and hopefully sell those to newcomers. Thus, all existing members are encouraged to invite newcomers to keep the money flowing. It’s only a Ponzi scheme if there are no other means to earn money while in the system.

Impostors or manipulation scams

Scammers can be fine actors, too, and they use this skill to pretend that they are someone you care for, know, or empathise with. Likewise, they can pretend to be an expert or someone important, like a famous person’s business partner encouraging investment in a certain asset. 

Impostors will try to appeal to your senses as human beings, and you won’t have the protection of government regulations when using cryptocurrency. The best way to counter them is to talk to someone you know who should know about this person. Contact a family member if they’re pretending to be a relative or mention this person in a social media group for crypto traders if they claim to be a financial advisor.


Basics in avoiding scams as a crypto trader

Avoiding scams is part of your responsibilities as a crypto trader, as are the risks of all business ventures. You can’t always recover from being a victim to any of them. Thus prevention must be practised at all times. If you wish to take exciting investment opportunities, then you should do the following:

Read the white paper of new offers

All new crypto projects announced must come with a white paper. It is a document issued by the company behind the project, including what it’s set to do and the agencies verifying its validity. You can’t always expect to recognise all organisations mentioned in the document, but you may use Google to look them up. What you find, or lack thereof, determines how trustworthy the company behind it is. 

The white paper should also give you clues on the potential of the investment. Ideally, it should mention its ambition to improve crypto use and adoption as a whole rather than its plans to become “the next Bitcoin”. It will be a scam if it promises profit instead of progress. Crypto aiming to compete with a similar existing asset, like BTC, ETH, or DOGE, are likely to fail. They’re not scams, but they are bad investments. 

Look up additional information on the internet

Any investment opportunities that intrigue you can be just as interesting for somebody else. A quick look at an online search engine should lead you to various platforms where it is a topic for an open forum. Read through their comments and give your own take on the subject to further clarify a project’s legitimacy. 

Another great source for information other than social media is blogs. Someone famous in the crypto trading community can make content about this new project you are looking forward to and share their predictions about it. Likewise, you should look into critics’ blogs to see points that could reveal it as a scam. If you don’t find anything about it, whether it’s referenced to the project’s details or people talking about it, then it’s most likely a scam.

Stay connected with a community of crypto investors

Prevention of mistakes is all about learning from somebody else’s experience, and a network full of like-minded people is a great way to get a heads-up on possible dangers. Even if you’re not looking to discuss a specific project, it helps to be a part of a social network of crypto investors. Someone else can come across a scam you can learn about and prepare for. 

Report scams you discover to help fellow crypto traders

Stay vigilant and be one of the pillars of crypto adoption, which is only possible if cryptocurrency use can eliminate these scams that deter investors. If you ever come across a scam as a witness or a victim, you have a social responsibility to report it to other crypto traders. This is how you help other people learn from your experience and strengthen the crypto community against scams. You can also benefit from sharing your experience because someone else can give you ways to avoid it or solve the problems it causes. 


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