Over the past five years, cryptocurrency has taken the market by storm. Virtual coin exchanges have led to an increase in virtual crypto coin investments, giving people a new option when it comes to enhancing their portfolio.
With an increase in cyber investments, the cryptocurrency revolution has also scammers a way to commit fraud. Since this new type of currency does not easily fall into the existing framework of federal and state regulations, it is easier for criminals to take advantage of investors.
Types of cryptocurrency scams
Bitcoin, the most widely used type of cryptocurrency, can be traded easily between two parties without going through a financial institution. While you may like the fact that exchanges are private and not regulated by the government, you should be extremely careful that your transactions are valid. According to The Balance, bitcoin scams include the following:
- Selling fake cryptocurrencies, telling investors that it is the new upcoming alternative to bitcoin
- Operating bitcoin ponzi schemes, where organizers award investors for getting others to join in an investment pool, yet there is no return on investment
- Calling people while posing as federal agents to ask them to transfer bitcoin to repay back taxes and other unpaid fees
- Tricking victims to download malware, which hacks into crypto bank accounts and transfers bitcoin into another false account
One of the most common tactics people use to commit fraud is to buy a bunch of bitcoin, causing the value to increase significantly, only to dump the coins, causing the value to drop.
Protect your investment
There are several ways you can protect your cryptocurrency investment according to the U.S. News. First, make sure to store your bitcoin in a safe and secure way. Do not store all of your currency in an online virtual cloud but rather opt for an offline physical wallet. Separate the public and private keys given to your bitcoin account and secure the currency with strong passwords and encryption codes. Avoid sharing the key with anyone. Finally, be sure to do your research when choosing a trading platform, and only do business with reputable sources.