As of 2022, cryptocurrency is only 13 years old. Bitcoin, the world’s first cryptocurrency, first launched in January 2009.
Since then, the crypto market has evolved into thousands of different cryptocurrencies on countless different blockchains. But most of these will never attain any sort of status or sustain any notable gains.
That’s why most new and experienced crypto investors stick to coins like bitcoin.
But because bitcoin is the most valuable and the most popular cryptocurrency, it’s also the target of the most scams and hacks. There are countless types of bitcoin scams that you need to be aware of if you want to keep your investment safe.
Unlike other currencies or investments that are backed by the government or financial institutions, crypto isn’t backed or secured by anything. If you lose it, it’s gone for good.
Keep reading below to learn about bitcoin scams and how to prevent them.
Bitcoin, Other Cryptocurrencies, and NFTs
Before diving into the various scams you can encounter when you buy bitcoin and hold onto it, it’s important to lay a foundation.
Why? Because crypto is stored in one of two places; a crypto wallet or an online exchange.
Bitcoin is just one type of cryptocurrency. But the scams listed below apply to virtually all cryptocurrencies. Most scams can work on any crypto.
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Crypto wallets allow you the amazing opportunity to self-custody your funds. That means you own and control it, and no one can take it from you or censor your transactions (unless you fall victim to scams).
Likewise, NFTs are tokens on the blockchain, just like cryptocurrency. And many of them have value as well. So they can be stolen in the same way that bitcoin is.
As you read through these scams, remember that they apply to all blockchain-based assets.
Types of Bitcoin Scams
So what are the most common types of bitcoin scams, and how can you avoid them to keep your cryptocurrency investment safe? Here are the most notable:
Social Engineering Bitcoin Scams
One of the most common and effective bitcoin scams that take place in the cryptocurrency realm (as well as outside crypto) is social engineering.
This is when scammers pretend to be someone reputable. Often, they pose as customer support from cryptocurrency exchanges, crypto wallet providers, banks, Paypal, or other financial services.
They will provide elaborate messages to convince you they are legit. Often, they notify you of a potential theft from your account and provide instructions to “safeguard your account.”
To do this, they will either request your private keys to your crypto wallet (seed phrase) or send you a link to a malicious website that can connect to your crypto wallet or access information on your device.
To avoid these scams, you must be aware of how the services you use would contact you if there was ever an issue. Also, if you receive a sketchy email, check the “From” address.
Oftentimes, they will use an email account that looks like a real company, with a minor variation. For example, instead of an email coming from paypal.com, it might be coming from paypal.1.com or another variation.
Never click links in suspicious messages, and never, ever provide your private keys to anyone. No legit company will ever request your private key.
Other Types of Social Engineering Bitcoin Scams
Social engineering scams can happen in countless different ways. Romance scams are very common as well.
Scammers will create fake profiles on dating websites, get into deep conversations, and change the subject to finance or crypto-related topics. They often present opportunities and will ask you to send the money, or will tell you to purchase using a link they provide.
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Fake influencers will also commonly message you on platforms like Twitter or Instagram. They will create a profile that is identical to a legit person, like Elon Musk or Jack Dorsey.
Then they send messages about the investment opportunity of a lifetime.
No legit opportunity to make money in crypto or NFTs will ever come from a stranger, an influencer, or in a direct message.
Phishing Bitcoin Scams
Phishing is among the most common financial scam. This is when hackers send you a link to a website that looks legit. It might have branding from a financial service such as Paypal or Coinbase, but is a fake website created by the attacker.
It will request information like passwords, seed phrases, or wallet addresses to “verify” or “secure” your account.
Always check the sources of the message, and always check the URL to make sure you only visit official URLs.
Scammers are very good at creating URLs that look legit, only to lead to a completely different website once you click it.
Blackmail Bitcoin Scams
Scammers will often blackmail users. They send a message saying that they have a record of every website they have visited, including adult content, and so forth.
They claim they will make this information public unless you send them crypto as a ransom.
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As a user, you have no idea if what they are saying is true. Though most likely, they do not have any information about you. They are just trying to create fear in you.
In either case, this blackmail is a serious offence and should be reported to law enforcement or the FBI.
Rug Pulls Bitcoin Scams
Rug pulls are the bread and butter of scams in the crypto and NFT world right now. They are a serious problem, leading to billions of dollars being stolen each year.
What is a rug pull? It’s when a product, service, or NFT project “creates” an opportunity. This opportunity promises either interest, appreciation, or NFTs that can be sold later for a profit.
They will invite early investors to get in at the lowest possible price. Once they have “sold out” of their presale spots, the founders behind the project take all of the money and disappear. The project was never actually released.
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Most often, the founders will delete the website, all social media accounts, and everything related to the project after securing their funds.
Rug pulls happen almost daily in the Defi and NFT space.
For example, a new cryptocurrency was released in November 2021 based on the hit Netflix series, “Squid Games.”
SQUID coin was released, hyped up by influencers, and saw a huge increase in trading volume and price of the token. At its peak, shortly after launch, the founders drained all of the funds from the contract; over $3 million.
Thcoin’sns value fell to zero in a matter of hours, leaving speculative investors in the dust.
The ease of creating cryptocurrencies and NFT projects leads countless scammers to enter the market this wayIt’s’s believed that many of the same scammers are responsible for rug pull after rug pull.
Once they find the formula, they just rinse and repeat. Since most crypto founders choose to remain anonymous, it makes it easy for hackers to create false brands and personas and build trust anyways.
Cloud Crypto Mining
A legitimate opportunity to make money in cryptocurrency, particularly with bitcoin, is through mining. But mining is cost-prohibitive for many and requires the use of loud computers.
So many companies offer cloud mining. Essentially, you pay for equipment, but it’s managed at a dedicated facility on your behalf. This is legit. Well, as long as you choose a legitimate cloud mining provider.
Many fake cloud mining companies will create convincing websites, use stolen photos of other cloud mining operations, and market their cloud mining services.
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They claim you will make a certain amount in mining rewards each day or month. It just requires an upfront investment to get started.
But since they don’t own any of the equipment and aren’t mining, they just make off with the money.
To safely get into cloud mining, only choose reputable service providers with a proven track record, real reviews from clients, and people in the company you can contact directly.
How to Buy Bitcoin Safely
Talking about all of these scams, and how they lead to billions of dollars in stolen funds each year, is quite depressing.
Luckily, as a crypto enthusiast, there are a few simple steps you can take to make bitcoin and crypto a safe and secure investment. If you’re smart and practice good online hygiene, you have very little to worry about.
Here’s what to do:
Never Share Your Private Keys
We’ve said it before but we’ll say it again. The most important thing you can do to keep your crypto secure is never, ever share your private key with anyone.
No one from a cryptocurrency exchange, wallet provider, bank, government office, or any other business or organization will ever need to ask for your private key.
That’s why it’s called a “private” key. Write it down on paper. Store it in a safe if you have one. Never type it out or store a photo of it on a device. It’s too risky.
Your public key, or public wallet address, is fine to share publicly. With a public key, you can only send assets to your wallet, neveextractingct anything out of it.
Use a Bitcoin ATM
Most people buy their bitcoin online, through a crypto marketplace. But using a bitcoin ATM provides a fast, safe, and secure way to buy bitcoin without needing to connect your bank account.
With an ATM, you can insert cash and get bitcoin sent directly to your crypto wallet. You can bypass the banking system altogether.
You can find bitcoin ATMs nearly anywhere in the US. And with a proper identity verification system, it’s easy to stay safe while using one.
Use a Hardware Wallet
Most people who invest in cryptocurrency store their funds in one of two places; their online crypto exchange, or a software wallet.
Crypto exchanges might offer security, but they control your funds. It’s in their custody, not yours. It might seem nice, but it’s antithetical to why cryptocurrency exists in the first place.
Software wallets offer you the chance to self-custody your funds. However, they are more considered “hot wallets” since they’re virtually always connected to the internet.
Hackers can use any number of tricks to gain access to your device remotely and have been known to extract assets from software wallets.
Clicking on a malicious link, where the website automatically connects to your software wallet, can lead to wiped funds.
To avoid this problem the easy way, one must simply purchase a hardware wallet, such as a Ledger or Trezor. These are small hard drives that only connect to the internet when you plug them into your computer.
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Assets cannot leave the wallet unless you plug it into your computer, type in a password on the physical wallet, and confirm each transaction by pressing buttons on the wallet.
No one can steal funds from a hardware wallet.
You just need to ensure you never Osbourne wallet. Even if you do, however, you can purchase a new one, type in your original seed phrase, and recover all of your youcryptosto.
Don’t Buy Speculative Cryptocurrencies
Cryptocurrency has established itself as an asset class that is here to stay. But most cryptocurrencies are or will be worthless.
Keep your investing in proven cryptocurrencies like bitcoin, Ethereum, or something that has real utility and value beyond speculation or hype.
Bitcoin will always be taking since it’s number one. It’s crypto gold.
Ethereum powers the world of NFTs and Defi. It’s a network that others can build upon and will be around forever as a result.
Other cryptocurrencies like Solana, Tezos, Polygon, Polkadot, and others in the top 100 are building something of value, with experienced teams. These are cryptocurrencies worth buying.
Stay Safe Online
There are many other types of bitcoin scams you may encounter. They will usually be a variation of those listed above.
Familiarize yourself with these and practice good hygiene online. And remember, if something sounds too good to be true, it is.
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