“Look before you leap” is a piece of smart advice that not only applies in real life, but also when investing your hard-earned money. Before committing to any investment, it’s only prudent to do your due diligence and research intensely about the asset that you’re eyeing to own or trade. This is especially true if you’re considering putting your money on newer avenues for investment, such as cryptocurrencies.
While fairly new, cryptocurrencies have steadily gained a loyal following in the past decade. Unfortunately, not everyone you buy or trade crypto assets from are well-meaning individuals who wish to see the continued growth of their preferred coin’s user base. There are unscrupulous individuals as well who have no second thoughts about scamming people out of the contents of their cryptocurrency wallets for their personal gain. It’s imperative to steer clear of these deceptive people so that you can achieve your financial goals using your chosen cryptocurrency.
Red Flags You Should Watch Out For When Investing In Crypto Coins
The good news is that there are certain ways to determine if the people or organizations you are transacting with online are legitimate traders or if they’re just trying to scam you of your precious coins and tokens. Watch out for these red flags and stay on your toes when you’re dealing with people who exhibit them:
An Express Guarantee of High Returns
When it’s too good to be true, it probably is—especially when you’re dealing with cryptocurrency investments. If anyone promises you high ROIs if you invest in a particular coin, be wary. Digital currencies are inherently volatile, and there’s no absolute certainty that your investment will grow if you put it in an unknown coinage that is touted to go big in the next few days or so.
It’s much better to put your money on currencies like Bitcoin, Ethereum, and Monero if you’re planning to hold onto them for a long time. These coins have established communities, which can help them survive and thrive for longer. For instance, if you plan on trading in Monero (XMR), keeping a few coins in your Monero wallet for quite some time gives you a better chance of getting decent returns than putting a sizeable amount of money into a young currency that has no proof of feasibility.
The Other Party Demands Advance Payment
Cryptocurrencies are also known as decentralized finance. This system has plenty of advantages, as decentralized coins are unlikely to collapse at a single point of failure. At the same time, though, cryptocurrencies are not regulated by a central body. In many places, digital coins exist in a legal gray area where their users cannot exactly expect the same level of protection as those offered to people who carry out their transactions using fiat money.
As such, great care must be taken so that you do not get scammed out of your coins when transacting online. If, for example, the other party you’re transacting with asks for advance payment in digital coins, it’s safe to assume that it’s a scam. If you agree to their terms and pay in advance, there’s a good chance that you won’t see your payment back or the item or service that you supposedly purchased with it.
Using Love to Attract Business and Victims
Preying on a person’s emotions is another trademark of scammers. Some people who aim to take advantage of others try to use their victim’s feelings against them. They appeal to emotions to prevent their target from using their better judgment against unfair or suspicious activities. In general, mixing dating with investing is a bad idea, and entities who approach you with the intent of finding love while growing your money should be kept at a distance and eyed with suspicion.
Demanding Cryptocurrencies to Avoid Further Issues
It’s not uncommon for online scammers to claim that they represent government agencies. They typically approach people under the guise of investigating their targets for supposed illegal affairs and use the opportunity to solicit digital coins as a way to get the said person out of trouble. Some people even go out of their way to guide their victims in the step-by-step process of transferring coins from their digital wallets to that of a scammer.
Beware of such activities and don’t panic when someone approaches you for something that you supposedly did wrong while you’re online. Legitimate agencies approach persons of interest in a less shady manner. Also, if you’ve committed a reprehensible act, it’s unlikely that a simple payment of digital coins will make it go away.
Manipulating the Demand for Coins
Pump and dump is another common strategy that scammers use to attract cryptocurrency users to invest in their coinage. To attract users and claim that there’s a high demand for their coins, these scammers hold well-publicized launches and host advertising campaigns. Remember, though, that these efforts don’t necessarily translate to a feasible coin that will stand the test of time. Avoid getting hooked by showy ads and unsupported claims. Instead, take a deep look at the nature and history of the coin you are investing in and the community behind it to see for yourself if it really has a future.
Keep these tips in mind and you’ll have an easier time distinguishing cryptocurrency scammers from those that offer legitimate opportunities for investment. Also, don’t hesitate to do your own research when in doubt about a seemingly too-good-to-be-true investment opportunity that is presented to you.