Six types of crypto scams that are popular in 2022

Cryptocurrencies are gaining popularity again. Scam, respectively, also blooms in lush colour. Every year, scammers spend billions of dollars worth of crypts. It is not just a loss of money; it dramatically spoils the reputation of cryptocurrencies. We tell you how not to succumb to provocation.

Pump and dump scam

Pump and dump scams – are one of the most common but also the most difficult. Pumps and dumps have existed long and appeared in the stock markets. It is when an investor buys a large amount of a particular stock or, in this case, cryptocurrencies at a significantly reduced price.

The investor may receive a discount because it is generally considered a good investment. However, soon after buying shares at a discount, the investor will begin actively trying to sell them on all available exchanges. When a sufficient number of people who understand little about this kind of investment will invest their own money in the asset, the original investor will collapse most of his investment. As a result, he will make a profit, and the “victims” will suffer huge losses.

In simple terms, this is an artificial increase or decrease in the price of an asset, called “pump” and “dump”. With a “pump”, the cost of an asset rises sharply, while any news or factors do not support the growth. It follows from this that someone purposefully buys the asset.

“Dump” is the complete opposite. The asset is sold in large quantities, and therefore the price of it falls sharply. This process usually follows the “pump”.

Even though these schemes have long been outlawed, they are ubiquitous in crypto. Many scammers buy small market cap tokens at insanely low prices. It’s about fractions of a cent. After that, they will actively promote this token on various social networks. Even if they only have a few thousand subscribers, this can cause the price of a token with a small market cap to rise by huge percentages. However, the scammer will eventually dump his initial investment, and most investors will suffer significant losses.

Always do the necessary research before investing in small cap tokens.

“Pulling the rug”

The “pulling the rug” is related to the pump and reset circuits. The prerequisites for both processes are very similar, but the fraud comes from the cryptocurrency developers themselves. Developers will create a cryptocurrency to buy it in large quantities before it is listed on any public crypto exchange.

In most cases, these developers will own most of the cryptocurrency. After that, they will follow the usual pump-and-dump strategy, actively promoting the cryptocurrency at every opportunity. Finally, the developers will sell all their cryptocurrencies once enough people invest.

The “pulling the rug” is much more extreme than the usual pump and dump schemes. Due to fraud, the price of a cryptocurrency can fall by more than 99%. Losses are usually significant. On top of that, some “rugs” are suspiciously coded so that victims who have invested in cryptocurrency cannot sell them to another person.

It is considered “hard carpet tension”. However, scams are prevalent in the crypto world, and one way to avoid them is to only invest in crypto projects independently verified by a trusted third party.

Phishing

Phishing scams are standard on the Internet in many forms, but in the cryptocurrency space, they can be compelling. The principle of phishing is receiving an email or text message containing a link to a website you visit frequently. Typically, the email will say that you urgently need to sign in because someone is trying to hack into your account. Of course, email is always different, but the main thing is that they all ask you to log in somewhere.

For example, you received an email from Coinbase asking you to sign in for a security check. The link provided in the email will look like it is on the actual Coinbase website. When you click on it, the resource will look precisely like the Coinbase website, down to the smallest detail. However, it is not. It is a fake website that is spoofed from the original. Once you enter your login credentials, hackers can see everything you entered and, in turn, hack into your real Coinbase account.

Usually, these phishing websites may have tiny URL differences that are easy to miss. For example, instead of linkedin.com with a small “l”, it could be Linkedin.com with a capital “L”. Scammers can be more intelligent than you think, so you should always double-check the URL before entering any sensitive information.

Fake tech support

This scheme became famous in 2017; now, most people do not fall for technical support scams, but still, you need to be aware of them and always be on the lookout. 

If you ever get a pop-up message or something like which says that an error has allegedly occurred and the only way to fix it is to call a specific number, do not call.   

In most cases, he will redirect you to a call centre in another country, and the scammer will try to get every possible detail from you during this call.

As far as crypto tech support scams go, scammers often pose as employees of various crypto exchanges. Sometimes they succeeded in taking over people’s wallets, Coinbase, Binance accounts, and more.

They may also call before you call them, so you should never trust someone when they say they are calling from whatever cryptocurrency exchange you use.

False Claims

The site may indicate that reliable third parties have audited the project; it already has many investors, partners, subscribers, and more. But once you take a close look at each of these projects, you’ll notice that the “audits” are done by dubious companies that say the project is fine as long as they get paid to do it. Often, there may not even have been an audit. For example, all “investors” can be a collection of stock images next to a vague description of who the person is. All subscribers can be bot accounts with no actual participation. The fact is that each cryptocurrency puts forward many different statements, but not all of them are always true.

You will be surprised how few people verify the claims of every crypto project. However, in many cases, seeing something written on a website is “proof enough”. You should always check the ads for the cryptocurrencies you buy.  

Celebrity use

Influencers and cryptocurrencies are 21st-century phenomena, so it would make sense for both to go together like bread and butter, right? At least sometimes. From the very beginning, brands have used influencers to promote their products, and now they are used to enable specific crypto projects. But here’s the thing: Many of the crypto projects influencers are pushing these days are jack-and-dump scams or scams. In some cases, the influencers may not even know it’s a scam; they’re just getting paid for their Instagram post.

In the past, even some high-profile influencers have been caught promoting fraudulent cryptocurrencies. You mustn’t think that famous people can’t do anything wrong. If you’re interested in a project that an influencer is promoting, try to learn as much as possible about it before investing in it. You shouldn’t just take someone’s word for it, especially if they’re making money.

Conclusion

In general, there are many different ways to scam cryptocurrencies, and even the smartest and most experienced of us can fall for one of them. However, it is essential to note that these scams are not directly related to cryptocurrencies. Instead, almost all types of these scams have existed since before cryptocurrencies. And, whenever money is involved in anything, scammers are inevitable.

Before investing in any crypto project, you should always have a clear head and reason. In most cases, crypto projects are not scams, and the only way to find out what projects they are is to do research, read reviews, verify claims, and not blindly trust anyone’s recommendations.

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