There has been a manifestation of different scam techniques or strategies in crypto as the cryptocurrency space is evolving rapidly.
Scammers have been making ways and developing strategies to take funds from investors in a dubious way. Recently, there is exponential growth in crypto scams as new and old investors are losing huge funds at the hand of scammers.
Cryptocurrency, as a decentralized asset, it’s crucial to be careful and vigilant when making any sort of investment decisions.
In this article, I will be walking you through different paths on how to identify and avoid crypto scams.
If you’re able to read this article till the end, your chance of getting scammed in the crypto space will be minimal and you would be able to distinguish between scam and legit crypto projects, so without much ado let’s get started.
How To Identify Crypto Scams
Identifying scams in cryptocurrency may seem unrealistic as some people believe that it’s impossible because of the decentralization and anonymity features in crypto.
However, blockchain technology also possesses safety and security features, and many tools have been built for crypto and blockchain users to safeguard themselves from crypto scams.
Nonetheless, let’s check out how to identify crypto scams.
Unrealistic ROI (Return On Investment)
This is the most common and trending scam technique in the crypto space.
You should be cautious when you see any individual or a website that tells you to give your cryptocurrency to them to get a 100% and upward ROI monthly or weekly.
These sets of people usually create a website or a group with huge followers, if the offer sounds too good to be real, then you should avoid that kind of investment.
The cryptocurrency market is volatile and unpredictable, even expert crypto analysts are not always 100% sure of their analysis and they consider it speculation. Hence, nobody can guarantee a profit in this volatile market and you should desist from such investment as they are only looking for a way to dupe innocent investors.
ICO (Initial Coin Offering) Scams
The second on our list on how to identify crypto scams is “ICO Scams”. Most crypto enthusiasts always fall victim to ICO scams; hence, I will be letting you know how to identify one.
ICO is simply a fundraising technique that’s been utilized by every crypto project to acquire enough funds at their early stage for the development of the project and also to add some liquidity to the coin/token.
Crypto investors are usually eager to participate in this event because the token is sold to them at a very low price as opposed to the coin/token listing price. It’s usually capped at a certain amount from the coin/token total supply.
However, we’ve seen several ICO events that later aren’t worth it as the developers absconded with investors’ funds. You wouldn’t want to lose your hard-earned money in the quest for making an early investment profit in crypto, thus, I’ve explained how to easily identify ICO scams below.
Investment decisions in cryptocurrency shouldn’t only be dependent on the products of the project or the coin/token tokenomics but also the team. Investment in a particular cryptocurrency is an investment in the team.
You should conduct thorough research on the team behind the crypto project, check the information provided on their website, and check through their social media handles to confirm the team’s credibility.
If there is no tangible information about the team behind the project or perhaps the details and information provided on the website are fake (information that cannot be gotten on different social media platforms), then you should desist from such a crypto project as you’re trusting your fund on the team.
Another way to identify crypto ICO scams is by analyzing the project whitepaper. A whitepaper is a document developed and written that contains the concept and roadmap of the project.
An investor can get to know what the project team is bringing on board and the technology backbone of the project.
An ICO scam can be spotted through their whitepaper, when they promise what you think they may not be capable of delivering based on their previous experience, desist from such a project. Because a project whitepaper may look promising and attractive but may not have the true intention of delivering on the promises they made in the whitepaper.
Moreover, If a project doesn’t have a whitepaper to showcase what the project is all about, that’s a high-degree red flag.
A crucial step in identifying crypto scams is to analyze the token smart contract code if there is any possibility for Rugpull. Rugpull simply means when developers of a particular crypto project absconded with investors’ funds by removing liquidity from the pool which stops the ability to buy and sell the token swiftly.
Rugpull can also be referred to when there is a certain wallet (probably the dev team wallet) holding a significant supply of the token (notably 50-90%). If this wallet sells all of its tokens, it would have a huge impact on the market price of the token and the token price may plummet to zero ($0).
Identifying Rugpull in a particular token is not hard as it seems, as it was previously mentioned, some tools are being built to safeguard investors from crypto scams and I will be explaining how to use one of these tools to identify a Rugpull in a token.
Remember that the token liquidity must be locked to prevent rug pull from the liquidity aspect, however, you can easily identify Rugpull in a token by finding and copying the contract code and pasting it on the search bar of one of the smart contract code reading tools (tokensniffer.com). The tool will give you information on the smart contract code, you will know if the owner is holding a huge amount of the circulating supply and also if the token liquidity is locked or not.
Due to the decentralized nature of blockchain, scammers are taking advantage of this to scam crypto investors daily.
They have been evolving in strategy and technique to carry out their scam activities, I hope you shouldn’t ever fall victim to their scam techniques after reading this article.
The aforementioned guides will make you stay vigilant and smarter than these bunch of scammers and your cryptocurrency investment would be ideal.