Why are cryptocurrency scams on the rise?

The rapid rise in the price of Bitcoin in recent years has attracted people’s interest in cryptocurrencies. For investors, investing in the cryptocurrency market is like a new world, full of high-reward profits. However, high returns are relatively accompanied by high risks. In addition to the original dangers of the high volatility of cryptocurrencies, there are also risks such as ICO scams, Ponzi schemes (funding) and transaction scams. Due to the current lack of regulations and weak supervision, most of them have nowhere to ask for help.

Many people in the financial industry said that it is difficult to assess whether Bitcoin has actual value. Investing in cryptocurrencies faces more significant risks, and investors should choose carefully.

What is the value of cryptocurrencies?

Cryptocurrencies represented by Bitcoin, Ethereum and Ripple, have no sovereign credit endorsement and are generated through algorithms. Therefore, whether cryptocurrencies can be called currency is controversial in the industry.

Economist Nouriel Roubini said that cryptocurrencies do not meet the basic money standards and are not considered new forms. Cryptocurrencies can’t even be considered an asset, no way of calculating value.

Luis De Guindos, vice president of the European Central Bank, also believes that it is difficult to see the potential value of cryptocurrencies. Market participants should prepare for further price volatility.

As for bitcoin, Jie Michael Guo, chief professor of finance at Durham University in the United Kingdom and executive dean of the China Development Research Institute, said that the rise of bitcoin from the perspective of supply and time stems from the rise of bitcoin from absolute scarcity and rising demand. However, Jie Michael Guo believes that the Bitcoin value system has not yet been established, so it has not entirely fluctuated according to the relationship between supply and demand. The traditional analysis framework is only applicable to commodities whose value can be identified by investors.

Is it a new round of financial scams?

In financial history, scams have emerged one after another. Today, cryptocurrencies only recognized in a niche range are fetching “astronomical prices”. Some people also question whether cryptocurrencies are a new financial scam?

Bai Shipan, a visiting professor at the National University of Singapore, believes that Bitcoin initially only attracted people who believed in blockchain technology. It supported the concept of decentralized finance and were accepted as a payment tool in niche communities. Originated from market hype and more and more speculators joined.

Hayley Turck is a professor of economics at the Stewart School of Business at the Illinois Institute of Technology in the United States. He said that cryptocurrencies have the characteristics of being free from government interference and supervision, and cross-border convenience. Some people seek after those. However, after careful analysis, this logic that requires new investors to increase the price is a “Ponzi scheme”.

Where is the road to regulation?

Currency regulators in various countries generally believe that cryptocurrencies use algorithms to hide the identity and whereabouts of users and facilitate illegal activities. At the same time, the leverage of cryptocurrencies is extremely high, which brings risks to the financial system.

Santiago Espinosa is an analyst at market research firm MRB Partners. He analyzed that since central banks and governments cannot intervene in cryptocurrency transactions, it is difficult to obtain official support. He believes that U.S. market regulators will take further steps to regulate cryptocurrencies continuously.

According to another Japanese “Yomiuri Shimbun” website, encrypted asset trading has a high leverage ratio. While the profits are enormous, the risks are also huge. Cryptocurrency trading, which lacks tangible assets to back it, has shown a “bubble” trend.

The U.S. Treasury Department has previously stated that the negative impact of the surge in cryptocurrency prices has established a new financial account reporting system. Cryptocurrency and crypto-asset trading accounts and accounts for payment services. They accept cryptocurrencies will be subject to government monitoring.

In addition to the U.S., Japan and South Korea, regulators have tightened regulations on financial institutions holding and engaging in cryptocurrency transactions.

Why are cryptocurrency scams on the rise?

Fraudsters are masters at exploiting current events and trends to deceive victims. The malicious speculation of some media has produced a vicious effect, forming an endless cycle of negative belief in virtual currency.

As a result, between October 2020 and May 2021, American civilians lost roughly $80 million (€71 million) to thousands of cryptocurrency scams, according to the FTC.

The numbers are even higher in the UK: Police say victims lost more than £146m (€172m) in the first nine months of 2021.

Why are there more and more scams?

Compared to the traditional stock market, few regulations are governing the cryptocurrency market for investors. Massive media spread as a means to aid phishing and scams. Soaring cryptocurrency prices lure investors with get-rich-quick dreams
Social media amplifies fake news. There is also the lure of liquidity gains, which phishers can use as bait

What are the most common cryptocurrency scams?

You can also be hacked if you store your virtual currency securely on a cryptocurrency exchange. Often, however, real-life store-of-value companies promise to compensate their innocent users. Unfortunately, for victims of cryptocurrency fraud, there are no such guarantees.

Therefore, it is necessary to understand these scams. Here are some of the most common:

Ponzi scheme is an investment scam where victims are tricked into investing in non-existent companies or “get rich quick schemes” when in fact, just doing anything out of the scammer’s pocket.

Cryptocurrencies are perfect for this, as fraudsters always invent new, unspecified “cutting edge” technologies to attract investors and generate more significant virtual profits. In any case, falsifying data is easy when the currency is virtual.

Scammers encourage investors to buy shares in little-known cryptocurrency companies based on false information. The stock price then rose, and the fraudsters sold their shares for a sizable profit, leaving victims with nothing to lose.

Fake celebrity endorsements aren’t something new today. Scammers hijack celebrity social media accounts or create fake accounts and encourage followers to invest in the aforementioned counterfeit schemes. In this case, the scammers swindled around $2 million. To make the ruse more trustworthy, they even put Elon Musk’s name in a bitcoin address.

Fraudsters send emails and messages, giving victims access to assets stored on cryptocurrency exchanges. The only problem is that users usually have to pay a small fee first. The result is that the discussion does not exist, and their money is lost forever.

Impostor app isn’t hard to find nowadays. Cybercriminals disguise malicious programs and upload them to app stores. If you install one, it could steal personal financial details or plant malware on your device. Others might trick users into paying for services that don’t exist or try to steal your cryptocurrency wallet login details.

We should pay more attention to fake news or promotion scam. Sometimes the story behind the false propaganda is pretty dirty. Fraudsters will make fake press releases. These all pull the price and then sell at a high price to entice the bait.

Phishing is one of the most popular methods of operation for fraudsters. Emails, texts, and social media messages are disguised as sent from legitimate, trusted sources. Sometimes that source is a credit card provider, bank, or government asking to pay for something in cryptocurrency or private channels. I’m afraid that’s not right.

How to avoid becoming a victim

The best weapon against fraud is being sceptical. Unfortunately, we live in an age where not all messages are genuine. And many of them are explicitly designed to deceive and sneak attack. With that in mind, try the followings to avoid getting scammed.

Ensure people never unsolicited personal details via email, text message, social media, etc. It could be a hacker who hijacked their email or social account. If something, a project, is too good to be true, it’s usually a scam. Treat any investment plan with a lot of scepticism. Turn on two-factor authentication for any cryptocurrency account you own. Forgo any investment “opportunities” that require upfront payments. Never use unofficial app stores. Download security software to your device from a reputable provider. No matter how passionate the people around you are about investing. Please remember to stay calm and stay away from hype and scams.

In addition to general cryptocurrency exchanges, buying or selling cryptocurrencies can also be traded over-the-counter (OTC). However, there are many OTC transaction crises. Now, most people are accustomed to online transactions (online shopping, etc.) and directly use bank transfers and remittances to pay, especially in FB and Line groups. Therefore, it has become a hotbed of fraud crimes. The most common That is after the money is remitted, it is directly blocked or cannot be read or returned. In addition, the account is an ahead account or fake, which cannot be traced, and the loss can only be at your own risk.

Although scams are rampant, there are still ways to prevent them, such as performing KYC authentication on the other party. Using video calls for identity authentication, checking whether the ID card and bank account are yours, or the most direct way is face-to-face. However, it is also necessary to maintain vigilance in face-to-face encounters. For example, try to meet in a safe, crowded or bank VIP room, etc., to avoid the other party’s robbery under the transaction’s guise.

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