Despite the recent declines in cryptocurrency prices, digital currencies are still incredibly popular. Many still see cryptocurrency as a “get rich quick” scheme, where they can put a few dollars in and take out 10 or 100 times their money, ideally as soon as possible. But that mentality and a lot of misunderstanding around how cryptocurrency works has led to scammers trying to rip off the unwary.
In fact, nearly 33 percent of respondents said they had fallen victim to a crypto scam, according to a 2021 survey by CryptoVantage, a crypto news source. So those looking to trade digital currencies should be careful – even with those who seem to be giving them freebies!
Here are three types of cryptocurrency scams to watch out for – and how to protect yourself.
Top crypto scams to beware of
Crypto scams can take several forms, and it’s important to know how they operate so that you can recognize them when you see them. Dion Guillaume, global head of public relations and communication at Gate.io, a cryptocurrency trading platform, classifies the most popular crypto scams into three major categories: Ponzi schemes, pump-and-dumps, and rugpulls. Here’s how they work:
1. Ponzi schemes
A Ponzi scheme, also known as a pyramid scheme, is a classic scam. In this setup, you’re rewarded for bringing in more people to the cryptocurrency. Any money brought into the scheme is used as payouts for people higher up in the pyramid. When no more victims can be found, the scheme…
