Cryptocurrencies

Avoiding Cryptocurrency Investment Scams

Where the stock market, stock brokers and stock investment companies are highly regulated by both the U.S Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA), the cryptocurrency markets are not. They are basically a free-for-all – and trade in a high-volatility market where very few people know anything about how the underlying assets work.

Rapid price increases, limited market knowledge and no regulation? What could possibly go wrong…

The cryptocurrency market is so filled with scams, scammers and outright fraud that most major social media companies and search engines such as Bing don’t allow ANY advertising of any company involved in selling, trading or storage of cryptocurrencies or even any services associated with them on their platforms.

If that doesn’t send warning signals to potential investors it’s hard to see what will.

And this is a huge shame, because away from the scams cryptocurrencies are an incredibly exciting investment with potential for major growth. The major coins themselves are already proving to be effective diversifiers in IRA accounts and are offered by many respected alternative assets companies.

So how do the scammers work?

As well as suspect initial coin offerings (ICOs) where new coins are “launched” on the market, monies are taken and then the company vanishes, cryptocurrency scams take the form of trading tools, trading systems and tip-clubs where members knowingly or unknowingly manipulate cryptocurrency prices in the lower-volume tokens.

Tools can include crypto trading bots – which will promise huge profits for little effort and typically cost a few hundred dollars. With a few exceptions they simply don’t work and when you seek a refund the vendor will have vanished setting up a new website and newly built bot in it’s place.

Trading systems can and do work – but many crypto-trading systems are outright scams. Those that do work are typically promoted by well-known and respected traders with decades worth of verifiable track record. However because crypto markets move with such volatility you’ll need to be glued to your trading screen day and night or have an exceptionally high risk tolerance. It’s also important to realize that crypto’s themselves can’t be bought or sold as quickly as ETFs and stocks – meaning you can be badly hurt in rapid and deep price drops.

Crypto Tip Clubs are one of the most notorious scams and typically involve groups of 100 or more “insiders” following “trading tips” in low volume coins. They’re following just behind the leader who buys and then sells ahead of the inevitable market movement caused by their tip being acted upon, meaning that members are knowingly or unknowingly participating in an illegal pump-and-dump which will net big profits for the tipster, but little or nothing for the members. Many say that the entire crypto market is actually subject to similar pump and dumps and manipulation by a few big players. Again this is a risk in an unregulated market.

These are the main scams operating in the cryptocurrency investment field – and most new scams will involve at least some part of one or more of these.

So how can you protect yourself when looking for crypto investments?

• Only use legitimate and trusted companies or services, such as those we list above.
• If a deal looks too good to be true – it probably is. Look out for overstated profit claims made for tools and trading systems and check any recommended token or trading platform carefully before parting with cash.
• Check a service or company’s credentials at the BBB and with your local Chamber of Commerce if they are in-state.
• Read online reviews – is there a pattern of complaints with the company or service concerned?

Remember – all markets are filled with professional traders. If a system or tool could make big profits consistently they’d all be using it.