Many things can be said of cryptocurrencies, including that they are an unregulated and unpredictable market. Because of their increase in value over the years, sometimes reaching billions of dollars on the cryptomarket, cryptocurrencies are advertised everywhere, from social media to tube stations. As a result, investment in cryptocurrencies has appealed to an increasing number of new investors.
Unfortunately, Bitcoin’s peak in popularity has also drawn the attention of scammers seeking to profit from the cryptomarket, but in a slightly different manner. Because many of the recent investors are inexperienced and unprepared, there has been an increasing number of scam targets, also known as “crypto-bait”. Hence, the US Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have warned customers to not “purchase virtual currencies, digital coins, or tokens based on social media tips or sudden price spikes”.
So how to invest in cryptocurrencies without becoming vulnerable to hackers and scammers?
1. Beware of your sources
Be careful not to make your investment decision based on websites or advertising. Both can have an agenda for attracting new investors, such as website traffic or scams.
2. One tip or source is not enough to make an investment decision
Do not purchase tokens or coins based on a single tip, especially if it comes from an unregulated source such as social media. The information they promote is not always accurate or verified.
3. Do your homework
Make sure you thoroughly research which currencies to invest in as well as the entities behind them. As the rest of this article describes, many sites and organisations have fraudulent practices.
4. Keep your information safe
Use two-factor authentication. While people may gain access to your personal data, it is far less likely that they will gain access to your mobile phone.
5. Use several crypto-wallets
By spreading your cryptocurrency among multiple wallets and using different passwords, you will minimise the odds of your assets being attacked. Beware: third-party wallets will make you more vulnerable to phishing, so you may want to consider storing your wallets on your own computer.
6. Use a different deposit address for each transaction
Using a single deposit address can draw attention from hackers, so make sure you use a new address each time you make a new transaction.
7. Keep your investments to yourself
Do not spread the word on or offline about your crypto-investments. Doing so can make you an easy target.
8. Know how to recognise pump and dump scams
“Pump and dump” are among the most popular scams. They boost stock prices based on false statements in order to attract more buyers. Once the stock has reached its desired value, scammers “dump” their tokens for a huge profit, leaving investors with losses.
9. Avoid Ponzi scams
Investing is always a risk, whoever says the opposite or promises significant return on investment is not to be trusted. Ponzi scams typically claim to double users’ Bitcoin overnight. If a website makes such a promise and requires you to send them your Bitcoin, it can only be a Ponzi scam.
10. Research projects funded by Initial Coin Offerings (ICO)
An increasing number of legitimate businesses are set up through ICO-funded projects: the crowdfunding of the crypto-world. However, be careful not to fall for exit scams (the pump and dump of ICO) and impersonator scams (users pretending to be a celebrity or a business asking for investments).
11. Make sure you are going to a real Bitcoin exchange site
Some Bitcoin Exchanges are advertised on social media or search engines, promising Bitcoin purchasing under market value. One of the first tell-tale signs is the use of “http” instead of “https”. If the site is not secure, neither is the business. Fake exchanges may also offer to sell to PayPal. By asking for your PayPal information to close the sale, they gain access to and withdraw the funds from your account.
12. Be wary of emails you receive
Phishing scams are a timeless classic. You may receive an email or fake advertisement from wallet or exchange impersonators – even from services you already use. But these impersonators may redirect you to a website that will make you lose your Bitcoin through a fraudulent sale or simply give you malware. Stay on the safe side and do not open hyperlinks or email attachments.
13. Do not invest more than you can afford to lose
While this may sound obvious, investors can sometimes give in to gambling instincts and run the risk of losing a significant part (if not all) of their assets.
