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Here’s How To Not Fall For Cryptocurrency Scams

Cryptocurrencies have been around for a while now, and really took the investing world by storm with the 2009 release of bitcoin. Now, just over a decade later, there are over 1,500 digital currencies out there, and more being launched regularly. However, not all digital coins are the same.

You need to be sure to do your due diligence before investing in any cryptocurrency. While few everyday consumers actually understand what buzzwords like “cryptocurrency” and “blockchain” really mean, the thrill of owning a part of a new currency is undeniably enticing to almost anyone.

New digital currencies are offered up all the time, and eager investors throw money at the coins’ growth potential. While these coins may sound tempting, there are scams aplenty, so be informed before buying in. Keep an eye out for any issues or ‘red flags,’ so you can avoid being scammed…

Photo: Pexels/Retha Ferguson

Read The Fine Print

Some coins’ websites will literally admit, in the fine print, that the coins have no real use whatsoever. Why on earth would anyone want to invest in that? Interestingly enough, it appears most people don’t read the fine print (or care), so you can sleep soundly knowing you’re one step ahead of the curve by simply reading the stated purpose of your potential investment (e.g., saving on bank processing fees).

Photo: WikiMedia Commons/BitcoinXio

Locate The White Paper

A firm’s mission is identified in their “white paper.” Similar to the idea above, without a white paper, an investor has no idea of how the company plans to operate or succeed. Before you invest, wouldn’t you be interested in seeing a business plan? An ICO is only as serious as its white paper, and a lack of one shows an obvious deficiency in business acumen.

Photo: Seppings

Study The People Behind The Name

Those representing a cryptocurrency should be proud of their company and what they’re doing. Take a look at the management and staff on the cryptocurrency’s site, and take note of what you see. Hopefully you will find and vet numerous qualified individuals, but if not, think twice about trusting them with your money.

Photo: Tobias Schäfer

Take Note Of Your Risk Tolerance

As with any investment, there’s a chance that not only will you not make money, but you’ll, in fact, lose some. Make sure you’re not playing with money that’s committed elsewhere (e.g., your mortgage or utilities, etc.). Stay smart, and take a step back every now and then to look at the big picture (it’s easy to get sucked into the “game”). Most importantly, as with any other type of investment, don’t over-extend yourself, and never exceed your own investing comfort level.

There are numerous investing tools out there to help guide you based on your age, life stage, risk tolerance, etc. It’s important to read up on all your options to get a better understanding of what makes the most sense for you.