Scams Involving Cryptocurrency

The use of online currency or cryptocurrency provides a myriad of new scams that a person willing to seek the underhanded means of business and income may accomplish online and in the real world through items such as Bitcoin. There are numerous scams that become available as the years pass with each new online invention.

There are some common scams that a person investing or using cryptocurrency should remain aware of and avoid if at all possible. These include any type of shady exchange of currency, pyramid schemes that could rob each person, the pumping up of cryptocurrency and dumping it before certain issues occur, the Initial Coin Offerings and incidents where the actual coin does not exist. These matters may occur naturally, or someone may initiate the scam first and drag others into the scheme. It is important to avoid these instances completely to avoid the complication that is a massive loss of income, investment or online currency.

The Shady Exchange

There are multiple forms of exchange through different cryptocurrency online. The transaction could lead to a loss of income when the other party engages in a scheme to harm the person with the real cryptocurrency. The matter could involve transactions fees, additional funds taken or a complete loss of the digital asset. Trust in the other person or entity is important to proper exchanges. If the cryptocurrency that the person wants to exchange with disappears, the shady exchange could incur severe losses for the victim. When the other currency does not exist, or the investor pulls funding, the interaction may prove void or unreliable.

The Pyramid Scheme

Many companies provide a pyramid type situation where each person may earn money or online currency through acquiring new members or soliciting to others. The sales pitch attracts many to the scheme, and the person over the group earns through interactions, transactions with cryptocurrency or by sales. Once the person reaches a certain level, the pyramid pays him or her for a connection to the scheme. However, in many of these scams, each person attached will lose money or end up in a legal issue due to the nature of the pyramid scheme. With cryptocurrency, these matters usually involve investors and others attempting to cash in quickly.

The Pump and Dump Explained

Cryptocurrency is a scam when certain actions occur with others online. Many individuals attempt to use others by taking advantage of methods that few understand or are aware of with online currency. Through affecting the price of cryptocurrency, it is possible to affect the market as well. This is one scam of the pump and dump method with smaller altcoins other than Bitcoin. By engaging in this practice as a group, it is possible to change the smaller market with one type of cryptocurrency at a time. Then, the whole group may cash in when one altcoin fails and other rises.

Initial Coin Offerings

When a cryptocurrency company or startup initiates the currency online, there are initial coin offerings that may raise money for the invested business. The value of the startup may remain overestimated by others based on the potential. Others are nothing but pump and dump schemes by the groups involved in the scam. Stock trading suspensions occur for ICOs when there is not sufficient information about the company, questions about accurate public details and trading practices are questionable. This could also involve insider trading scams and manipulation of the market. Even with suspensions in place, investors may lose their money when the ICO is a scam itself.