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Five scams to watch out for when dealing with Bitcoin

Bitcoin, a currency founded in 2009 has had its fair share of controversy with Warren Buffet calling it a mirage while others such as Richard Branson raving about its potential in the new digital economy.  Just like the sentiment around Bitcoin, its value has been a roller-coaster with extreme jumps and equal downward momentum. What can be said with certainty is that the bitcoin’s value which was 0 at its inception has now risen to close to $12,000 in 11 years.  Bitcoin’s meteoric growth has drawn a lot of interest. The philosophy behind bitcoin does contrast with our traditional view of investment but one thing for sure is that it has the capacity to churn millionaires. Sadly, there are many opportunists, con men, and hackers out to prey on anyone chasing the millions through Bitcoin. It  really does not help that the market is largely unregulated and private. If Bitcoin has aroused your interest in terms of trading, holding, or mining it then you should be wary of these potential scams.

  • Fake Bitcoin Exchanges and Wallets

Criminals set up  fake bitcoin exchanges usually luring investors with free coins or other too-good- to- be true incentives. They usually look legit but are only ploys to steal. These scammers have also created fake bitcoin wallets with back doors that gain access to your private keys. To avoid these types of scams investors are advised to stick to well-known Bitcoin exchanges and forums and avoid hunting for cheaper transaction fees or incentives. When logging in to an exchange make sure to check for the secure key sign on your web browser. Before committing your funds, google the people listed on the about page. Search for them on LinkedIn and find any other news about them. If the only place you can find any information about them is on their website, that is a red flag you should not ignore. Check for any spelling errors on the site and find reviews from other places other than that website. 

  • Ponzi and Pyramid Schemes

Con artists have come up with schemes that promise Bitcoin earnings derived from recruiting other people into a team. Most of these are called crypto clubs and are similar to the now-defunct Bit club network which defrauded investors over $722 million. Be careful of any investment that needs you to recruit other investors to make returns!

The Pyramid Scheme Illustration

  • Internet Scams

Many of the popular internet scams like the stranded relative, the Nigerian prince, and phony marriage proposals, which are all tricks to get you to send some money to an unknown person are now using digital currencies like Bitcoin. Some send emails that purportedly come from SARS efiling (Revenue authority in South Africa) claiming you have a tax refund with a link to ‘claim your money’. Bitcoin scammers are using the same tricks. Be careful of such ploys.

  • Malware

Bitcoin trading is connected to the internet and as such hackers are using malware to gain access to wallets and siphon your funds.  A must-have for any Bitcoin investor if good malware /antivirus protection which must constantly be updated and changed to beef up security. Be on the lookout for any emails that promise free coins.

  • The next best Bitcoin

Although there are several alternative cryptocurrencies, you must avoid the newer coins as many of them are not real cryptocurrencies or just test projects which will likely fail. Stick to the top coins!

All in all, the  cryptocurrencies are  being built on new technologies and as such there is need to watch out for added risk factors and be alert for fraud and scams. Always remember; if anything is too good to be true, it most likely is!

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