Curious about Bitcoin? BBB outlines common cryptocurrency scams

by Keylen Villagrana | Mar 1, 2021 6:00:00 AM

Cryptocurrency is making plenty of headlines this year. Major players such as Tesla, Mastercard and Square have started to invest and implement Bitcoin into their company strategy. As cryptocurrency becomes an increasingly normalized method of payment, it remains mostly misunderstood.

Cryptocurrency is a resource for investing and transferring money all over the world without incurring hefty fees or government regulation. Unlike the U.S. dollar, which is a government-backed physical form of payment, cryptocurrency is digital code. It is not considered legal tender. It has also been banned in many countries.

Since cryptocurrency is new and largely unregulated, its price valuation is volatile. You may have heard stories of people making thousands overnight, but the reverse is also true. People have also lost large amounts of money in short amounts of time.

One red flag for investing in crypto is “too-good-to-be-true” statements of quick return with no or low risk. Performance and risk go together. The higher the return, the greater the risk.

Crypto is also an excellent vehicle for scammers since many users don’t yet fully understand the technology. These digital transactions are not reversible. If you are the victim of a scammer, you can likely kiss your money goodbye.

If you are looking into investing in cryptocurrency, try to keep these three tips in mind:

  1. 1. Secure storage of the digital code is imperative to prevent theft, loss, damage, or a cyberattack. That also means if you forget your password or credentials you have completely lost access to your money. A “cold wallet” is one of the safest methods to save your private key information.
  2. With many companies joining the crypto bandwagon, be aware of Initial Coin Offerings (ICO). ICO is fundraising for new cryptocurrency systems (think crowdfunding), instead of asking venture capitalist investors. Many ICO’s are legitimate; however, some ICO’s are set up simply to take your money with no plan or the technology to support it.
  3. Keep an eye out for “pump and dump” schemes. Groups of fraudsters often claim to have inside information on a particular type of stock that’s on the verge of spiking. Those claims cause a large number of people to purchase that stock, which drives up the price. Once the price is at an all-time high, they sell it at an enormous profit and all the investors lose their money once the prices crash back down.

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