Cryptocurrency plays a big role in the world of Forex trading. This is because cryptocurrency, or virtual currency, can be used as a funding method for brokerage accounts, or it can be traded as an asset with many different brokerages. Unfortunately, there are many cryptocurrency-based scams out there that savvy forex traders need to be able to spot. We’ve compiled this guide to help point out some of the things you’ll need to look for to avoid being scammed.
Conditions for Scammers
First, many traders don’t entirely recognize what cryptocurrency is or how it works. The lack of understanding, in combination with lenient regulations or lack of them all together creates a recipe that scammers can take advantage of. Some countries have even banned the use of cryptocurrency altogether because regulating it is so complicated or next to impossible for some governments to work out. Regulation is something we can look at with many brokerages to see if they are legitimate, but you’ll need to do more research when it comes to cryptocurrency. We’d suggest sticking with safer, more well-known options, like Bitcoin, Litecoin, Ethereum, Ripple, PayPal, etc. Otherwise, try doing some research online to find out what type of experience others have had with a lesser-known option. Educating yourself about cryptocurrency and how it works is crucial to avoiding these types of scams.
Types of Scams
There are a couple of common cryptocurrency scams out there that we know about:
- A pump and dump scam happens when creators of a certain cryptocurrency own a large portion of it. Once the cryptocurrency is released, the price increases, and more people buy into it. Then, the creators sell off their large portion after the price increase. Once the company has sold its holdings, the value of the cryptocurrency drops drastically and the company disappears completely. This leaves traders with a useless coin that isn’t worth anything.
- OneCoin is surprisingly still an active scam to this day, despite the fact that its creator has disappeared and with FBI involvement. These scammers didn’t use a blockchain, so this cryptocurrency did not have a public ledger, nor was it a real cryptocurrency.
- Fake mobile apps on the App Store and Google Play Store have become a nuisance lately. If you’re downloading an app for a trustworthy currency, be sure that it is the legitimate one. Read comments and try to choose the option that is highest on the list of search results.
- Email scams involve providers asking for cryptocurrency payments. These usually revolve around Bitcoin and scammers often give themselves away with poor wording or misspelled words.
We’ve covered the best conditions for cryptocurrency scammers and some of the most common types of scams revolving around cryptocurrencies. Below, we have also provided some tips that should help stop scammers in their tracks. Before giving out your personal information or purchasing any cryptocurrency, be sure to research the company thoroughly and follow these guidelines:
- Make sure that the cryptocurrency uses blockchain technology. This offers more protection against manipulation from scammers.
- Check for the small lock symbol near the web address and ensure that ‘https’ is included in the address.
- Look beyond the wording on any website. Many might claim to be better or faster, but you’re actually looking to see how the provider plans to accomplish these things.
- Another red flag to look for promises that a company will make you rich or that it is the magic answer. Most legitimate cryptocurrency companies are focused on the bigger picture, such as how cryptocurrency can improve the world’s financial system.
- Trading cryptocurrency as a CFD is one way to trade the currency without actually owning it.
- Always research the company behind the cryptocurrency. Does the company reveal who they are and where they’re located? If not, it’s a good idea to stay away.
- Try reaching out to the provider’s customer service team. You’ll want to see if they seem professional and polite. Are they willing to answer all of your questions? If support is hard to reach or pushy, or if they dodge some questions, then these are signs that they are scammers.
- Be careful with your personal information. If you hand out as much as your phone number to a scammer, you’ll open the door to a headache. Be sure that you trust the provider before disclosing any of your information, or use fake info when testing out customer support.