Common Crypto Scams and How To Avoid Them

contentjunkie (73)in #cryptocurrency • 8 years ago

From NewsBTC

The cryptocurrency space possesses two qualities that make it the ideal environment for scams. Firstly, there is no shortage of legitimate anecdotes about people who have enjoyed immense wealth courtesy of early digital currency investments. The proliferation of such tales provides the perfect backdrop for a “get rich quick” scheme. Secondly, since the technology is incredibly tough for the layperson to understand, a lot of information has to be taken on trust. Unfortunately, thanks to these two factors, there’s a growing list of stories of people who have been duped out of large sums of money. Here are some tips to help you avoid joining it.
Common Crypto Scams and Their Tell-Tale Signs
Ponzi Schemes: Ponzi schemes work by recruiting new investors to generate returns for their first backers. These scams usually fall to pieces when it becomes apparent that there isn’t actually enough money being generated for all investors.

A common red flag of ponzi schemes is that they promise a high rate of return with very little risk. This is contrary to the usual investment maxim of “high risk/high reward”. Put simply, if it sounds too good to be true, it probably is.

Another red flag to watch out for is multi-level or tiered marketing structures. If it sounds like one level is relying on the efforts of a lower tier to generate profits, you’re likely dealing with a ponzi scheme

Examples of recent cryptocurrency ponzi schemes include Bitconnect. Ethereum founder Vitalik Buterin was amongst those to call Bitconnect out based on their hugely optimistic forecast for investor returns: