Although Bitcoin is certainly not a scam, there are plenty of people out there that will try and scam you out of your precious Bitcoins. Like any other high value commodity some people will do everything that they can to get their hands on Bitcoins. So in this chapter we will look at some of the most common scams that you need to avoid.
Bitcoin Exchanges that are Fake
We would always recommend that you use a cryptocurrency exchange that has an established reputation and have been operating for a few years. In this guide we have told you about Coinbase, Kraken, Poloniex and Bittrex. There are others too such as Cex.io, Bitstamp.net and Changelly.com.
There are so many cryptocurrency exchanges available today that it would be impossible for use to vouch for any of them. You need to conduct your own due diligence here and find out the history and look for reviews from users.
If you see an exchange offering rates that are just too good to be true then be very suspicious.
Unfortunately there are fake exchanges setup that are designed to look like the real thing and then when you try to trade with them they will steal your Bitcoins and you will never see them again.
These fake exchanges are setup to prey on newcomers to the Bitcoin space. They offer the opportunity to purchase Bitcoins for up to 20% lower than you would see on reputable sites like Coinbase. Unfortunately some new people fall for this scam – you know better now!
Another sign of a fake exchange is where they offer to purchase your Bitcoins from you at a higher than average price and then send you the amount in US dollars to your PayPal account. This will never happen and they will just steal your Bitcoins.
An established exchange should also initially restrict the amount of crypto you can buy until you confirm your identity, they also have 2FA so that if a change in IP address is detected on your account you will be asked to confirm your device and this may involve sending a code to your phone.
These are performed using email. The aim is to get the login details for your online wallet. So you will receive an email from a sketchy domain name that may look close to something like Coinbase.com for example that is not from the genuine site. It might be from Coinsbase.com pretending to be Coinbase.com or they use other tricks. There are people who frequently try and pretend to tempt you into investments, ask to send them crypto and any scam you can imagine.
If you fall for this kind of phishing scam and use your Coinbase.com login details to log into the fake website then the scammers then have your information and can login to your Coinbase account, lock you out of your own account and steal all your Bitcoins!
These can also lead to the next issue.
These are nasty. You will be asked to click a link in an email or on a website that will download malware on your computer without you knowing it. Usually the malware is a keylogger which will record everything that you type and send this back to the scammers. So if you type in your Coinbase username and password this will be shared with the thieves.
Never click on any links in emails or on websites that you are not 100% sure about. If you notice something being downloaded then stop it immediately.
If someone offered you a guaranteed return on your investment then you would be interested right?
Well here’s the thing – nobody can offer you this kind of guarantee with cryptocurrencies. There is no such thing as a risk free investment.
Bitcoin and other cryptocurrencies are volatile by their very nature. If someone tells you that they can guarantee a daily 10% return on investment they are a scammer. A Ponzi scheme pays off the early members with the investments made by new members. It has been going on for years and so many people fall for new ones.
The best way to avoid Ponzi scheme scams is to always bear in mind that if it seems too good to be true then it probably isn’t.
In the world of Bitcoin this is usually in the form of ‘double your bitcoin’ sites, they offer the opportunity to double your bitcoin by simple sending them your bitcoin. Guess what, they usually will do a runner with your crypto. So I would stay clear of these online sites.
There is a lot of interest in Bitcoin mining.
Cloud mining is a concept where you do not have to invest heavily in the necessary high level computer hardware for Bitcoin mining. Simply join a group and the mining is done for you. Of course you will need to pay for this privilege.
While there are legitimate cloud mining programs there are a number of scammers as well. Take a good look at the website to see if they have a secure https domain and also search for reviews about the company on search engines.
We don’t recommend that you get into Bitcoin mining when you are starting out. If you do like the idea of cloud mining then you must do your homework otherwise you run the risk of scammers taking your money for nothing in return.