Beware Of These 10 Bitcoin And Altcoin Scams In 2021

bitcoin and altcoin scams
Reading Time: 6 minutes

Last Updated on May 5, 2021 by Admin

If you are a cryptocurrency investor, you definitely need to be know these 10 Bitcoin and Altcoin Scams because the number of scammers in the industry continues to rise.

Background of Bitcoin scams

While significant returns are made by some cryptocurrency investors, the figure doesn’t come close to what miscreants on the dark side make.

Social media is one of the hunting grounds of potential victims who are easily swayed by promises of huge returns.

In the height of all the excitement, it’s easy not to spot red flags and fall into the trap set up by scammers.

Old scam tactics are still being used, but with the evolution of technology, there are newer methods that you need to be aware of.

A rule of thumb is that you need to make sure all your cryptocurrency transactions are done securely and privately.

A VPN encrypts your traffic and hides it from potential attackers and the best in the industry is by no doubt NordVPN.

  • NordVPN, overall best VPN service for secure crypto transactions
  • 68% off a 2-year plan
  • 30-day free trial
  • 30-day money-back guarantee
  • Antimalware
  • Adblock

You can check out more premium VPN services here, but we have done the homework for you.

Now let’s lift the lid and expose the popular tactics used by cryptocurrency scammers in the next section.

bitcoin and altcoin scams

The 10 scams to watch out for

1. Bogus Crypto Exchanges

The number of crypto exchanges in the world is difficult to pinpoint because platforms don’t necessarily need to be registered with any centralized authority.

While this supports the idea of decentralized currency, lack of tight controls of exchanges in some regions gives rise to bogus crypto exchanges.

It’s easy to get lost in all the noise because there are more than 500 exchanges, with more unknown platforms still in start-up phase.

In 2018, Ukraine police shut down 6 fake crypto exchanges and victims lost funds to scammers.

This is only a tip of the iceberg as there are some exchanges that have not yet been identified but are operating fraudulently.

Make sure you stick to top, trusted crypto exchanges like Coinbase.

Don’t give in to the shiny ball syndrome by experimenting with dubious exchanges.

2. Pyramid Schemes

In a pyramid scheme, funds from new investors are used to pay previous investors and the cycle continues until it explodes.

Usually the founder flees with the funds or they are arrested and either way investors lose funds.

The Security and Exchange Commission issued out a warning of Ponzi schemes that use cryptocurrencies in one of their investor’s alerts.

Transactions involving cryptocurrencies are often non-traceable and difficult to reverse so it’s easy for scammers to get away with your funds once they have succeeded in emptying your wallet.

If returns are too good to be true, alarm bells should start ringing.

3. Fake Altcoins

According to Statista, there were around 66 cryptocurrencies in 2013 and this number exploded to more than 4000 in 2021.

Unfortunately, fake cryptocurrencies are also part of the pool and investors are lured into buying new altcoins while the value is still low.

It’s better to play it safe and invest in established cryptocurrencies instead of pouring funds into an unknown altcoin.

There are many cases of fake altcoins out there, but the one which takes the trophy is One Coin.

Founded by Bulgarian entrepreneur Rija Ignatova, One Coin had one goal – to displace Bitcoin as the top cryptocurrency.

However, this turned out to be an elaborate pyramid scheme and in the end 4 billion dollars vanished, together with the founder.

Do your research first before buying new, cheap altcoins and don’t be fooled by attractive websites or endorsements by celebrities.

4. Hacking

To execute transactions using cryptocurrencies, you need the internet and there is a risk of getting hacked.

Malware can be used to steal credentials to your cryptocurrency wallets and that way an attacker easily gains access to your funds.

Make it a habit to use a VPN so that you hide your online activities and transact securely.

  • NordVPN is a trusted, reliable VPN service you can use
  • Packed with security features
  • 68% off a 2-year plan (coupon in link)
  • Best value for money
  • Free-trial available

There are many ways in which malware can be delivered to your device.

For additional safety, don’t click suspicious links, visit malicious sites or open email attachments that are dubious.

Make sure you subscribe to our newsletter to get regular updates on how you can protect yourself from malware.

5. Altcoin pump and dump scams

This tactic originated in the stock market and has evolved to include digital currencies as well.

Scammers join forces and promote a cryptocurrency heavily through fake news or celebrity endorsements.

Investors pour in funds and this drives the value of the cryptocurrency upwards, thus attracting more investors.

When the value reaches its peak, the scammers sell off together and make huge profits, leaving investors high and dry.

John McAfee was indicted for pump and dump fraud, which saw him profiteering through marketing fees plus investment gains.

6. Fake payments

This type of scam blends with the popular phishing scams and instead of supplying sensitive information, you are required to make a payment in Bitcoin.

You can receive a message requiring you to make an urgent payment via email, voice call or even on online messenger.

Once you comply and make the payment, the funds are lost forever and you cannot trace them.

The success of the scam hinges around using scare tactics, deadlines and messages that mess with your emotions.

In the end, in all the panic or confusion, you make the wrong judgement and send Bitcoin to a scammer.

If you receive a message prompting you to make a payment, first confirm whether the request is genuine.

7. Social media con artists

There are countless social media channels and groups that focus on cryptocurrencies.

Scammers use various tactics on social media, from providing links to fake exchanges, tricking people into sending them Bitcoin, to hacking accounts of celebrities and asking for donations.

In 2020, Twitter accounts belonging to Elon Musk, Jeff Bezos, Bill Gates, Barak Obama to name a few were hacked and the attackers asked for donations in Bitcoin.

One of the tweets read:

“Everyone is asking me to give back. You send $1,000, I send you back $2,000.”

Unsuspecting followers complied and the criminals got away with millions.

8. DeFi rug pull

In a Decentralized Finance rug pull (also crypto rug pull), the value of a cryptocurrency drops to zero because no one manages to sell it as the scammer drains the liquidity pool by “exit scamming”.

When there is a sudden loss of liquidity, other traders or holders who are lucky enough salvage their funds, resulting in a sell demise of the cryptocurrency.

Those who are unlucky are left holding valueless coins and in that case a rug has been pulled from under them.

Rug pulls are made possible because Decentralized Exchanges use Uniswap, a protocol that allows traders to swap ERC20 tokens without the need of an order book.

Be careful when a new coin is heavily promoted in Telegram groups and other social media platforms.

Once a scammer spins a coin and gains enough takers, a rug pull is executed.

Here the scammer drains the liquidity pool, leaving victims with a worthless coin.

One way to safeguard yourself from a rug pull is to make sure that liquidity is locked and to know the team behind the token.

9. Non Fungible Token (NFT) scams

NFT is a new wave of digital currency and each NFT is unique in that no two are the same.

Like what happens in the fine art industry, the value of a NFT is determined by the underlying digital asset and what a buyer is willing pay.

The first virtual artwork was sold for a staggering US$69 million at an auction by Christie’s. The artist’s signature is encrypted in the NFT so that buyers can verify the authenticity of the artwork.

It is stored in a blockchain and each NFT certifies a digital asset like a photo, video or audio to be unique.

While this new development has genuine players, scammers have also joined the field to cash in on unsuspecting victims.

Scammers can create fake websites and sell NFT with no underlying digital assets or even clone NFT websites in order to harvest login credentials.

10. Fake Bitcoin mining hardware

Parting with large sums of money for a fake product is a painful experience.

Buyers of mining equipment are not spared and scammers see an opportunity.

Bitcoin mining requires immense computing power and if you don’t do your research right, you risk buying a cheap knock-off for an exhorbitant price.

When buying mining equipment, it’s advisable to stick to recognized brands that have trusted reviews.

Conclusion

As a cryptocurrency trader, you have to be extra-cautious because scammers constantly evolve to adapt to rapidly changing technology.

Leave a comment below and support us by spreading the article on social media or by visiting the support us page.

Carry out your cryptocurrency transactions anonymously and securely by using NordVPN, a trusted VPN.

Translate entire site:

Tech writer and VPN expert

Was this article helpful?
YesNo
Subscribe
Notify of
guest
0 Comments
Inline Feedbacks
View all comments
0
Would love your thoughts, please comment.x
()
x