Now that prices are pumping, the amount of scams are increasing. Every other day I see someone on X get their wallet drained or lose their tokens to a fake token sale. This is troublesome because crypto is already risky and volatile. Add in some aggressive scammers and it becomes incredibly easy to lose your coins (and hard-earned money) into the crypto scam black hole. And just like how a black hole devours everything permanently, you will never see your coins again.
In this comprehensive guide, I want to arm you with the knowledge to outsmart the most common crypto scams. We’ll explore the devious tactics scammers use and some pro tips on safeguarding your digital assets. Whether you’re a HODLer, day trader, or shitcoiner, this is a must-read before you click buy on your next token.
The Alarming Prevalence of Crypto Scams
The rise of digital currencies has created a parallel rise in complex scams. The most alarming part? The scams are becoming increasingly sophisticated, making it challenging to distinguish legit ventures from fraudulent ploys.
Crypto scams are prevalent and diverse, capitalizing on the digital and decentralized nature of crypto. From simple Ponzi schemes to elaborate phishing scams, fraudulent practices can leave investors and participants with heavy financial losses.
The Four Horsemen of Crypto Scams
Understanding the enemy is the first step to victory.
1. Fake Token Sales
I’ve seen a lot of these recently and they are the dumbest way to lose your money because they are easily avoidable. Essentially, an influencer or account with a lot of followers on X says they’re going to start a token, and they urge their followers to send them tokens. Sometimes, as is the case recently, these accounts can receive tens of millions of dollars from followers that are trying to get the next 100x.
Once they get the money, sometimes they launch a token, and sometimes they don’t. When they don’t, the shiddy scammer simply keeps the funds or makes a convenient “error” when creating the smart contract. “Oops, I burnt the liquidity/tokens on accident and the mint function is renounced so I can’t create any new tokens,” or something like that. There goes your money into the crypto black hole. Please, for the love of all that is holy, do not send tokens to random anons on X.
2. Ponzi Schemes
Ponzi schemes, named after the infamous swindler Charles Ponzi, promise high and consistent returns that are virtually impossible to sustain. In the crypto realm, the scam artist usually lures investors with the promise of ridiculously high annual percentage rates (APR).
If you were around in 2021/2022, you’ll remember node season, which was all Ponzi schemes. Ponzi’s can be extremely profitable, but you have to invest in them early. If you’re late, you will get rekt. You can argue that everything is a Ponzi scheme, but some Ponzi’s are more aggressive and egregious than others.
How Ponzi Schemes Work
• Investors are convinced to buy into a cryptocurrency project or token.
• Early investors are paid returns from the investments of new entrants, creating the illusion of a profitable venture.
• The cycle continues until the scammers run off with the majority of the funds, or new investors dry up, and the system collapses, leaving the majority of investors with worthless tokens.
3. Phishing Attacks
Phishing is a type of cyber scam where a hacker impersonates a legitimate entity to trick individuals into providing their sensitive information. This can happen through emails, social media, or even direct messages within cryptocurrency platforms.
How Phishing in Crypto Works
• A user receives a message from what appears to be their wallet service or exchange. Some of these emails can be nearly indistinguishable from a real email, but there is usually some type of formatting or spelling error, or the email address looks funky. If it looks and feels weird, you’re better off not clicking on anything.
• The message leads to a fake site that looks identical to the legitimate service, asking for login credentials or private keys.
• Victims provide this information, giving scammers access to their crypto wallets, which can lead to the loss of all their digital assets.
4. Pump and Dump Schemes
Pump-and-dump schemes artificially inflate the price of a cryptocurrency through false or misleading statements. The goal is to attract unsuspecting investors into buying high, after which the scammers dump their holdings, leaving the late investors with worthless coins.
The Inner Workings of Pump-and-Dump
(This is super common in shiddy meme coins)
• Scammers buy up large amounts of a low-value cryptocurrency, or large amounts of an insider-launched token.
• They hype up the coin through false news, social media campaigns, and spam messages.
• The price surges as new investors rush to capitalize on the ‘opportunity.’
• Once the price peaks, the scammers sell their holdings, causing a sharp price drop that wipes out the investments of those who bought at the inflated prices.
Defensive Tactics: How to Spot and Sidestep Scammers
Now that you’re acquainted with the threats, it’s time to move on to defense. Arm yourself with these tactics to help spot and avoid crypto scams.
Conduct Diligent Research
For every new opportunity, spend time researching the offering and the team behind it. Look for verifiable information and be skeptical of exaggerated claims. Utilize cryptocurrency forums and reach out to the community to get their feedback on the legitimacy of an investment or platform.
Secure Your Cryptocurrency Wallet
Protecting your wallet is paramount in the fight against scams. Always use a reputable and secure wallet, never store your private keys online or share them with anyone, and always enable two-factor authentication (2FA) where applicable. Use a hardware wallet for added security, although I’ve heard that some phishing sites can even drain hot wallets linked to hardware wallets.
Stay Alert to Red Flags
Scammers often lay traps with warning signs. Beware of unsolicited or out-of-the-blue offers, incredible investment opportunities, and high-pressure sales tactics. If it sounds too good to be true, it probably is. Trust your instincts and be willing to walk away from any deal that makes you uncomfortable.
Don’t answer, and don’t click on any links from sketchy DMs on X. The cute girl in your DMs is a dude who wants to steal your tokens (a honey trap scam).
Vigilance and Education are Your Best Allies
While the allure of quick profits can be strong, navigating the crypto space requires a combination of vigilance and ongoing education. Scammers adapt and evolve, so staying one step ahead means keeping abreast of the latest scam tactics and continuously educating yourself.
Remember, in the Wild West of Crypto, you hold the key to your safety, and the goal is to not lose your tokens in the crypto scam black hole. By staying informed and trusting your instincts, you can avoid the shiddy scammers lurking around every corner. Don’t be just another number in a crypto crime statistic – be the person who secures the bag at the end of the bull.
Cheers!
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