Are Cryptocurrencies Safe? 4 Tips You Should Know To Avoid Crypto-Scam

Sick of being a no-coiner but worried about the safety of crypto? Here are 4-tips for you to look out for crypto-scam! After reading this article, you will not become a crypto guru, yet, but you are sure to dodge some of the most common scams in the crypto space.

BE MINDFUL OF WHERE YOU ARE STORING

Before purchasing your first cryptocurrency, either via a crypto exchange, OTC or a Bitcoin ATM, you should look into some storage options for your crypto. There are a few options to store your crypto.

You could always use a combination of the above when it comes to crypto storage solutions. Regardless of what storage options you picked, there are a few steps you can take:

First, always enable two-factor authentication whenever possible

Second, avoid clicking suspicious links (Phishing email)

Third, write down your private key physically (avoid saving it online or taking any photo of it) and keep them safe.

NOT YOUR KEY, NOT YOUR COIN

If you have decided to use a digital wallet, you need to remember one golden rule in the crypto space: “NOT YOUR KEY, NOT YOUR COIN.” “Key” refers to the private keys of your crypto wallet, which is used to access your funds. The rule of thumb is you should NEVER share your private key with anyone.

If you reverse engineer this principle, you will know EVERYONE is coming after your private key. Hackers and scammers will lure your private key in various ways; here are some common formats:

Imposter website: Some hackers would create fake crypto-related websites, such as crypto exchange, Defi protocol, crypto wallet, etc. Some of them might ramp up the imposter website on Google Ad. So you should always double-check the website URL before typing in any information.

Phishing email/social groups: Hackers will send scamming emails/ messages on social media to lure your information, such as private keys. They would usually fake the identity of an established crypto-related entity. These scammers would usually issue fake ICOs and giveaways to lure your private keys.

In general, no institution, protocol, or community would request your login credentials or private keys to issue airdrops or send funds. Therefore, you should NEVER provide your information no matter what channel you receive that request.

RESEARCH, RESEARCH, AND RESEARCH - PUMP AND DUMP SCHEME

Let's move on to more sophisticated scams. If you had been in the crypto space for a while, you’d probably heard of the term “Pump and dump scheme”.

This term usually refers to a group of scammers who manipulate a price surge of an asset and lure newcomers into it out of FOMO (Fear of missing out).

Then the same group would sell off a significant amount of that token, which would usually drive the price down to a fraction of its original value—resulting in the newcomer holding the bags of worthless tokens.

To ensure you would never fall into these scams, you should always do your due diligence to research and invest in what you understand. Avoid investing based on “insider information” or FOMO.

IF IT LOOKS TOO GOOD TO BE TRUE, IT PROBABLY IS - RUG PULLS

Another common scam is rug-pull. Like a pump and dump scheme, a rug pull would also result in you losing money. The difference is how they do it.

While pump and dump scammers often bought a substantial amount of specific tokens at a low price, rug pull scammers are those the development team removed the liquidity of a token, which made it impossible for investors to sell in the first place.

A rug-pull usually happens in Defi protocol like a decentralized exchange (DEX), where scammers list their coin/token and pair it with the blue-chips token. Once there were enough investors had lured into the liquidity pool. The dev./scammer would withdraw all the funds and drive the price to zero.

So how do you avoid rug pulls? You have to understand if the project you are investing in is “Unruggable.” Read their whitepaper, see if the dev team renounced their ownership of the token’s contract, see if a few wallets held the majority of the token.

THE BOTTOM LINE

You could never go wrong with being educated and informed before investing. In fact, you are on the right track if you are reading this. When you bump into a rare opportunity, you should always take some time to research the projects’ background: Learn more about their development team, the tech, their roadmap, and what institutions are backing it.