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How to avoid cryptocurrency scams

An expert explains how to avoid crypto scams

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Pile of physical Bitcoins, known as Casascius coins, which were created by Mike Caldwell in Sandy, Utah.

Bitcoin tokens are pictured in Sandy, Utah, on April 3, 2013.

Rick Bowmer, Associated Press

Cryptocurrencies continue to be a major source of investment among the American population, but there are still major questions about whether or not you should invest and how to avoid any scams.

What is cryptocurrency?

Cryptocurrencies are decentralized digital currencies that can — for the most part — be used to buy and sell things. They have a tendency to gain value over time as well, becoming major investment opportunities for many.

Now, there is no physical cryptocurrency coin. It’s all digital. Owners often have a digital wallet that allows them to buy or sell coins through digital exchanges. The wallets are often online, or they’re stored offline on a hard drive.

Most currencies are funded by a central bank. But cryptocurrencies often gain value based on their users. The value of the coin case rise and fall based on how many people invest in it.

Recently, there has been a slew of meme-based cryptocurrencies, like Dogecoin, Shiba Inu coin and Baby Doge coin, among several others. These are cryptocurrencies that gain support from social media.

Right now, cryptocurrencies are trending downward, as I explained for the Deseret News. This has had an impact on the price and value of single crypto coins, like the Shiba Inu coin or the SHIB coin.

“Crypto, in general, is in a slump right now, particularly Ethereum-based tokens like Shiba Inu and Dogecoin,” according to a report from GoBankingRates.com (via Yahoo Finance).

Is cryptocurrency safe?

In the U.S., some people have fallen prey to cryptocurrency scams, which has created hesitancy among investors to dive in. The Federal Trade Commission said consumers have lost a combined $80 million in scams in recent weeks. In fact, there has been a 10-times increase in crypto scams compared to the same time period in 2020, as I wrote for the Deseret News.

How to avoid cryptocurrency scams

Crypto expert Adam Morris, co-founder of Crypto Head, said in an email to the Deseret News that you can identify scams in a really easy way — if it sounds too good to be true, then it probably is.

“People should always be wary of platforms offering huge returns,” Morris said. “Never send your money or cryptocurrency to a platform you don’t completely trust. If you do some quick research you should be able to gauge online how reputable a company is.

“Even if you see big names like Elon Musk supposedly endorsing the investment, do not take this at face value,” he added. “Scammers are so successful because they use recognizable and trusted names to dupe people into believing it’s a sound investment when really these names have no association to it at all.”

Establish your investment goals

So how do you stay safe? Morris said people need to figure out what their goals are to determine how much money they want to earn and how they want to earn it. Do you want to make earnings quick or through long-term investments?

Dedicate time to research the market

Time is also important. Make sure you determine if you have the time to keep up the market of alt-coins, Morris said.

Find a trading platform you trust

Morris said people should also make sure they’re trading cryptocurrencies in a safe way.

“Make sure you are using an exchange you trust and that doesn’t have insane fees,” he said.