What the meteoric rise in the prices of Bitcoin over the last year did is quite simple. It increased mainstream interest in the original cryptocurrency. Investing in Bitcoin has never been as tempting when the prices are looking bullish again. Yet, the rise did not come without consequences.
As the new investors entered the market, there was also a rise in scams and frauds pertaining to Bitcoins. Retail investors lost money to shady ventures. This is the time to become more vigilant when investing in cryptocurrency.
Here are a few common scams related to Bitcoin and how you can avoid them.
Hardware Wallet Theft
An increasingly popular option for individuals, who are concerned about privacy and security, is the hardware wallet. It is a physical device which stores and safeguards all your private keys. It is an offline method for you to protect your bitcoin even further. The hardware wallet is as small as USB keychain drives.
However, there are a few vulnerabilities which have surfaced. These built-in glitches open the wallet to hackers and hence, a user’s holdings are open for theft. This scam can easily be avoided if you buy these wallets only from trusted sellers.
Selling and buying at exchanges is still common for most cryptocurrencies, despite their decentralized nature. While this makes it easier for you to choose the coins you desire, it lacks proper regulation. So often, the investors are left penniless instead of making a fortune.
To avoid this, become an alert investor. Visit only secured websites. Also, if any exchange offers unrealistic prices or heavy discounts, consider it a red flag. Why not avoid a costly mistake?
With the boom in cryptocurrency, companies have found a way to raise capital. With numerous blockchain based companies entering the market, exciting ideas and unique projects now find financial backing. However, this massive explosion of opportunities pertaining to ICO has raised fraud.
The investors can be separated from their bitcoin in several ways. Lying about products, misleading investors and portraying fake team members is quite common. If you wish to avoid these scams, make sure you research about the venture and also review the team behind it.
Cloud Mining Schemes
Mining is the only method by which new bitcoins are extracted, without buying or exchanging. Yet, it is a highly resource-intensive activity. Massive amounts of processing power and electricity are required for mining the coins. Hence, it involves a lot of money. However, companies have come up to allow users to rent server space and mine the coins.
These companies can offer unrealistic promises and are not always transparent about the diminishing returns over time. Their bold claims often do not even include the true costs. There are others which rely on Ponzi schemes and can cause huge losses. You must look into the risks and opportunities carefully.