According to the Federal Trade Commission, almost 46,000 people were victims of bitcoin scams in 2021 alone. These scams resulted in a total financial loss of $1 billion. Unfortunately, because the crypto sector is mostly unregulated and so many people are interested in investing in virtual money, it is riddled with scammers and crooks.
The good news is that you do not need to abandon your ambitions to diversify your portfolio into cryptocurrencies in order to avoid scammers. Following these guidelines can help you secure your finances while also exposing you to this intriguing new asset class.
1. Complete your homework
Being an informed consumer is the single most effective way to prevent becoming a victim of a crypto scam. Do not purchase any cryptocurrency until you have thoroughly examined the following factors:
- When were the coins made, who made them, and why were they made?
- What technology powers them?
- How they differ from other coin offerings
- How many coins are produced?
- What value do they add that other coins do not?
By ensuring that you understand the intricacies of any cryptocurrency you are considering purchasing, you can avoid purchasing currencies that were designed just to enrich their founders.
You should also conduct research on the websites you use to purchase bitcoins to ensure that they are secure and have a solid reputation for protecting their customers.
2. Be careful who you trust
There is a lot of bogus cryptocurrency advice out there, and you don’t want to listen to someone you shouldn’t and get duped. Take no advice from celebrities, persons on social media or online forums, or anyone you don’t know well and who lacks significant financial credentials.
3. Ensure the safety of your cryptocurrency wallet.
If you are acquiring virtual currencies and storing them in a crypto wallet, you should ensure that your digital wallet was founded by a trustworthy organisation with a track record. You should avoid logging into your wallet on public wifi if you don’t want to reveal your wallet details to anyone. Signing up for two-factor authentication is also encouraged, as is password-protecting your devices so that if someone steals your phone or laptop, they cannot access your wallet. Using numerous wallets and even cold storage devices that are not linked to the internet can also be beneficial.
4. Make use of multi-factor authentication.
Even if a hacker acquires your login credentials, they will be unable to access your wallet or bitcoin trading account due to multi-factor authentication as the code must be delivered to your phone number or email id before access is granted to them. That is not going to happen. Receiving a code you did not request is also a red indicator that an attempt has been made to compromise your account.
5. Pay special attention to website URLs.
You don’t want to be a victim of a falsified website or enter your information into an insecure website. Before attempting to log in, double-check the web address to ensure it is real and begins with https (not http).
6. Consider obtaining exposure to cryptocurrency through more traditional assets.
Finally, if you want to avoid being a victim of a crypto scam, consider investing in ETFs that provide exposure to the crypto business or purchasing equities in firms whose performance is influenced by bitcoin performance. Scams are significantly less likely with these more traditional, regulated investments. By following these six rules, you should be able to keep your money safe even in the crypto world, where fraud is common.