When crypto trading online, there are many dangers. Cryptocurrency trading is largely unregulated and many transactions are anonymous, or at least can’t be traced in the event that you fall victim to a fraudulent scheme.
With that in mind, you should be aware of the common cryptocurrency scams that can place your online trades at risk. If you’re new to cryptocurrency trading and you want to know which platforms are legitimate, you should consider Coinswitch.
Common Scams
With so many aspiring traders in such an anonymous market, there are many scammers and fraudsters who want to take advantage of people’s optimism and greed. They often do this by offering services or products that are dubious.
Here are some examples.
Baseless ICOs
Initial Coin Offerings, or ICOs, are essentially fundraisers for new cryptocurrencies that have been launched. If you’ve invested in the ICO, you receive coins when the project goes live. Many ICOs launch with problems, however, even when they are legitimate.
While there are legitimate ICOs with a plan for future growth and use-cases, many have no business plan and just want to trick people out of their cash. If an ICO only has a whitepaper behind it and the developers have no experience in crypto or computer technology spaces, it’s a risky investment.
If you are interested in a project, sit back and watch how it develops. Actions speak louder than words, so look for continued development. Many altcoins make big claims that don’t get fulfilled while a legitimate new cryptocurrency will announce future developments and, most importantly, deliver on them.
ICO Fraud
Where an ICO is based on outright fraudulent claims, they are often subject to investigations. While crypto markets are notoriously unregulated when compared to the stock market, fraud is fraud and so the American SEC and other government agencies have charged people with ICO fraud. The entire country of China has banned ICOs from being bought into to try and stop the problem.
Unregulated Brokers/Exchanges
Speaking of regulation, you should be wary of brokers or exchanges that don’t have their own regulations within the crypto space. There are hundreds of online cryptocurrency trading platforms that have no credentials or regulations, so you don’t know how legitimate they are as a company.
Take a look at their PR too. Legitimate brokers and exchanges will keep their followers informed and while they may hype up the crypto market sometimes, the suspect platforms may make outrageous promises of how much you can make through trading.
So how do these platforms scam you? After you’ve placed money into them, they may facilitate trades but charge you crazy commissions to pocket some of your cash for themselves. When you try to withdraw, they’ll make the process difficult in the hopes you’ll give up. The really bad ones may just steal the money you put in and refuse to payout, and you often have no recourse to get your money back.
Automated Bitcoin Trading Systems
Bitcoin is the most valuable and talked about cryptocurrency on the market. Naturally, this also makes it one of the most volatile. Many have created automated trading systems that seek to trade via arbitrage to make money by offering coins at different exchanges for a profit.
Bitcoin exchanges often ask for more money through fees related to conversion. The trades can also take hours to be settled, eliminating the arbitrage gains and leading to losses. This makes Bitcoin unfeasible for use with an automated trading system.
Safely Trading Cryptocurrencies
To finish off this short guide on avoiding trading scams online, here are some tips you should keep in mind when trading with cryptocurrencies. It’s important to remember that there are no guaranteed low-risk ways to trade with cryptocurrency, it’s a risky way to trade by its very nature, that’s why it can be so profitable!
Only Use What You Can Lose
This means you should only use money that you can safely lose if the trade goes south. That way, your finances, and your life won’t be negatively harmed by your trading performance. The crypto world changes at a rapid pace, so losing money is all too common for many traders.
Do Your Homework
You should at least read customer reviews about brokers and exchanges before opening your account. They will tell you about the service and whether it’s legitimate. There are also many cryptocurrency forums where experts can tell you whether new coins coming out are the real deal or a scam.
