Scams are very common in the world of cryptocurrency. This is intelligent people using new technology, to perpetrate old schemes. The most recent scam to draw reference to, is the twitter scam that took place on July 15th, 2020. The scammers hijacked a number of prominent personalities twitter accounts, and coaxed individuals by declaring that they would double their money if they sent bitcoin to a particular address. In the end, the scammers only got away with $120,000, however, the damage could have been much worse. What we would like to address is the common pitfalls that get regular people caught up in scams. What exactly can you do to protect yourself from falling prey to the kinds of scams that are in the public today.

My History with Scams

I've personally (me Keegan Francis), have fallen prey to two separate cryptocurrency scams. Both of which were mining scams. The first was a Dogecoin mining pool, and the second was a bitcoin mining pool. The theme being, that I really wanted to make money off of mining, but I didn't want to do the work myself. It both cases, I should have known better. Had I been able to recognize the red flags and the warning signs, I may have been able to avoid being taken advantage of by the scammers.

In the instance of the bitcoin mining scam, I didn't do much research on the company itself. This was my first mistake. I should have looked up the company, the domain on whois.com, and evaluated the promise of returns based on whether or not it was actually realistic. The problem was, I didn't know what was realistic to expect from an investment at the time. The company was promising to double my money in 6 months. Now, this isn't exactly the classic, "Double your money overnight" sort of promise, but it is still unrealistic for a company to promise a doubling of any investment in 6 months. The company did end up paying me out for 2 months before shutting down and completely closing up shop. All of this is to say, that anyone can fall prey to scams. This shouldn't ruin cryptocurrency for you completely if you have also been taken advantage of. If anything, it should encourage you to learn more about how cryptocurrency can be used for good.

Warning Signs

In order to identify the red flags that are characteristic of scams, you have to know what to look for. Here they are.

• The company is promising unrealistic, or guaranteed gains
• The company fails to pay out a withdrawal in a timely manner
• The company is new, and hasn't established a track record that can be trusted
• The identities of the individuals behind the company are fake, or are known scammers

What are Realistic Gains?

In order to determine whether or not the gains that are being promised by an investment are reasonable or not, you need to examine the mechanism in which the investment will multiply your money. This can be a surface level, or very technical and in depth analysis of the economics of the investment. I upped by analysis game by learning about the rule of 72. The rule of 72 simply informs you how long it'll take an investment to double given a particular interest rate. For example, if I am getting an interest rate of 8% on an investment, then it'll take 9 years for my investment to double (8 * 9 = 72). I would consider 8% an average, and reasonable expectation for any investment. Doubling my money overnight, or in 6 months, or even  in a year, are all examples of investments that I would be highly skeptical of.

The Fear of Missing Out

When looking at any investment, it is good practice to notice one particular emotion you may have. That emotion is the fear of missing out (FOMO). This emotion can get you in all sorts of difficult situations. In the instance of the recent Twitter hack, the scammers time-boxed the opportunity saying that they would only double your money if it was sent in the next 30 minutes. This is intended to trigger FOMO within the victims. People will be browsing the page, and see this opportunity, and notice that they have a limited amount of time before this opportunity is no longer available. If any investment opportunity is set up to trigger this emotion, this should be a big warning sign for you.

Go Full Crypto Covers Scams in Depth

My co-host Mrugakshee Palwe and I cover cryptocurrency scams and common pitfalls in depth in our latest Go Full Crypto podcast. Head on over to the Go Full Crypto Podcast Page, or download the latest podcast on Spotify or Apple Podcasts. If you or someone you know is susceptible to falling into scams, we're hosting a mastermind where we will dive deep into all the tactics that that scammers use to take your money. Sign up for the mastermind on the Go Full Crypto Learn Page.