Recently updated on October 25th, 2022 at 11:11 am
Since the development of Cryptocurrency, crypto enthusiasts individuals or firms have the knowledge that Crypto markets are not regularly maintained or regulated. So, if you are one of those people who have been trading for a while but are content with the way things are and do not believe that the Crypto markets should be regulated, you might change your opinion after reading this article.
While the financial news has always been focused on the rising and falling values of the currency, histories of scams and thefts, and suspected dealings in the finance industry, there have been several past scam situations that have been left out of the mainstream system and have invaded and remained alive in the Crypto world.
With the rising cases of Cryptocurrency scams online, knowing the schemes, traps, or baits can help you steer clear from them. To get you started, check out these 3 main baits to avoid when trading in any Cryptocurrency platform like Bitcoin Prime.
1. The Exit Scam
The Exit Scam has taken the Cryptocurrency world, and while it’s common in initial coin offerings (ICOs), it also targets small exchanges. As the most simple type of scam, it only consists of taking the funds and running. Trading exchanges have brought this up to a new level by getting a hold of the coins and trading with them.
After successfully getting a hold of the coins, these exchanges sell the coins elsewhere and inform their investors that they are simply trading coins in the exchange’s accounting system. Scammers who use this method are difficult to track down due to the decentralised, anonymous and unregulated operations of the virtual currency system.
As tempting as it may seem, it would be wise and helpful to avoid storing a huge amount of crypto balance on exchanges. You should take your virtual funds regularly and place them on a blockchain in an off-exchange wallet. With various exchanges in the market, make sure to get rid of any exchange that doesn’t pay out quickly or can’t effectively communicate, as these exchanges may be one of the scammers in the market.
2. The Stop Drive
The Stop Drive scheme is used by exchanges that are familiar with how you play your cards – where you stop, can hit the price with wise moves and then sweep up the profit. This scheme is done by putting up real coins for sale, believing that it will increase on the stops compared to the amount it will lose through selling enough coins to crash the price in a matter of minutes and repurchase them.
The downside about the stop drive is that selling and getting your coins back from stop covering. Investors don’t usually play the stop drive scheme, but it is usually the “house” that plays this scheme the most as they possess all the information of investors to perfectly time this crime.
3. Ponzi Scheme
Ponzi Scheme is when someone assures huge profits to investors and then runs off with the invested funds. Companies who are involved in this scheme consume all their energy in persuading clients to make investments from them. For example, if you see a crypto “project” that provides returns of 10% a year or more, you can identify that one as a Ponzi scam.
Ponzi Scheme research shows that it works by paying the previous investors the capital invested by the current investors, so it needs many investors to keep the ball rolling. The profits don’t exactly have to come from a messy business but can also come directly from the wallets of the most recent people that are victims.
Keep an eye on the guaranteed promise of high returns with little risk, as it is what scammers often use. If this unreliable scheme allows past investors to find new investors, that is another warning sign that you should avoid it. Also, if it offers unbelievably huge earnings or profits, it is a scam, and more likely or not, the main culprit will be a Ponzi scheme.
If you’ve done your research and you want to start your crypto trading career, one of the most important things that you must know is the scams and traps in trading digital currencies. Given the highly-volatile market, you might encounter these baits, so it’s essential to have knowledge on how to identify the legit ones to avoid losing your profits.