Bitcoin Scams to Avoid In 2021

Bitcoin and the overall cryptocurrency market has gone through a meteoric rise in the last few years and with it Bitcoin scammers. The increasing price of Bitcoin and market capitalization is appealing to new investors that have flocked into the market in the hope for a quick buck.

They may not totally understand the technology, but they have read stories about savvy investors that turned a few thousand dollars into millions and are now ‘Bitcoin millionaires‘.

Bitcoin Scams To Be Aware Of

The prospect of making money online mixed with greed brings out the bad in human nature. While the cryptocurrency market is often portrayed as being risky, fraudulent and used by criminal organisation. The reality is, wherever there is greed, there will be online scams.

If we can spot the clear signs, investors can avoid these scams and protect their crypto assets. The following 5 Bitcoin scams are the most common ones to be avoided.

#1 – Fake Bitcoin Exchanges Scams

In the hype that is Bitcoin, there are many users that are unsuspecting and visit fake exchanges in the rush to buy Bitcoin.

Similar to phishing, these scam websites can appear like a reputable crypto exchange. However, these websites are just an illusion to steal your personnel information.

Scam exchanges will use attractive promotional material that will appear too good to be true. These include offers to sign up to claim a reward for a “limited time only”, an additional bonus if you deposit a large amounts or the promise of multiplying your initial investment in a few months.

Fake Bitcoin exchanges will typically charge unusually high fee's to transact, make it very difficult to withdraw funds, or just steal your money all together and never to be heard from again.

Case Study: A recent example was in South Korea where government officials exposed a fake exchange called BitKRX. They tricked innocent customers by posing as a legitimate exchange by marketing themselves as branch of KRX, the largest finanical trading platform in South Korea.

Also be mindful of exchanges with fancy smart phone applications. These can be quite sophisticated but may be a Bitcoin fraud. Basically they can steal your information on your phone such as login details to your actual exchange.

There have been known instance where these apps have been downloaded from legitimate app stores such as Google Play.

How to Avoid Fake Bitcoin Exchange Scams

  • Stick with popular, well-known, legitimate Bitcoin exchanges such as Coinbase, Binance and Bitit.
  • Bookmark the exchange on your browser and always use it
  • Thoroughly research the exchange before registering an account
  • Be diligent with promotional material that sounds too good to be true
  • Don't be pressured to sign up to an exchange to receive special offers

#2 – Malware Within Software Wallets

Malware has long been a favorite among online scammers. Users that download software such as Bitcoin software wallets can contain harmful malware. These can be a little more difficult to identify.

Once the malware infects your PC, it will get access to your software wallet and drain your account, monitor the ‘clipboard' for cryptocurrency addresses and password, or just steal your Bitcoin private keys.

Walware is a common online method of scamming

How to Avoid Malware within Software Wallets

  • Purchase and use a trusted and reputable hardware wallet to store all of your cryptocurrency assets
  • Do NOT buy a hardware wallet from unauthorized re sellers
  • Do NOT just download any Bitcoin wallet in the App Store
  • Make sure the website has a padlock and click it to ensure the organisation name details match the website description
  • Use ExpressVPN or NordVPN to encrypt all your traffic including URLs that you search and protect your identity
  • Ensure your virus scanner is up to date

#3 – Scam Companies That Promise Higher Returns

You may have heard about these companies before as it has been well publicized. These scam companies will ‘trade' your money on the cryptocurrency market and promise a fixed percent

age return that is well above an average investment.

While it may sound appealing at first, these get rich fast crypto websites (or coins) should be avoided and are typically a ponzi or pyramid scheme.

Newcomers are enticed to the prospect of multiplying their initial investment within a defined period of time such as 12 or 18 months.

Case Study: The now famous example was Bitconnect which pulled off the biggest scam in cryptocurrency history. The company guaranteed to earn investors up to 40 percent total return per month – the more cash you deposited, the bigger and faster profits you could earn.

An image used by BitConnect to explain how its scheme works

Everything might seems fine at first. The balance starts to increase and draw excitement. It is difficult to believe it might be a fraud if they are paying you right?

But when you attempt to withdraw some profits, there's always a complication.

The scammers will make contact and convince you to deposit more funds to increase the returns. By the time the 12 or 18 month is up, it is too late and your hard-earned crypto is gone.

How to avoid Companies That Promise Higher Returns

  • Don't bother searching for things like ‘how to make Bitcoin for free' or similar projects
  • Trust your gut. If it sounds to good to be true, it usually isn't
  • Never give out you Bitcoin or private keys to an exchange that will “trade” it for you

#4 – Phishing

You may already know about the first scam on the list from your work place. A common way to target users using social engineering is using an unsolicited email that looks legitimate.

The email may appear to be from a trusted organisation such as a bank, or in this case, a cryptocurrency exchange or software wallet.

The email will often contain a link to another website that looks almost identical to the exchange or software wallet page you would normally visit.

Unfortunately, this is all a disguise to obtain your login information.

How to Avoid Phishing Scams

  • Never open an email that looks suspicious that you receive from a trusted entity like your bank or cryptocurrency exchange
  • Make sure to always double-check the URL to make you are visiting the actual website
  • Don’t click on any links that are emailed to you which appear suspicious
  • Never give up your private key to anyone including exchanges
  • Bookmark the actual exchange of software wallet address and always use it to visit the website
  • Make sure the website has a padlock and click it to ensure the organisation name details match the website description
  • Use ExpressVPN or NordVPN to encrypt all your traffic including URLs that you search and protect your identity
  • Ensure your virus scanner is up to date
  • Purchase a hardware wallet and leave your Bitcoin ‘offline'

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Kevin Groves
Kevin is the founder of hedgewithcrypto and is passionate about blockchain technology. He has been involved with Bitcoin since 2016 and is a swing trader with over 10 years of experience. He loves trading crypto using various platforms and helping others learn about cryptocurrencies via hedgewithcrypto.