How to Protect Yourself from Cryptocurrency Scams? [2021 Updated]

We have talked a lot about investing in cryptocurrency. We have shared enough content with you to help you start your crypto investing. 

The first rule of investing is – not to lose your money. Hence, you have to make sure your capital is protected. Many investors have lost money over the years due to scams in cryptocurrency. 

In this article, we will talk about different crypto scams and how to protect yourself from them.

What Are Different Crypto Scams?

There are many scams related to the traditional currency. You must have read about them over the years. In the crypto world, scams are almost similar. Below are some to watch out for: 

Fake Initial Coin Offering Like in equity, there is an IPO. Similarly, new crypto gets launched through ICO. There are hundreds of existing cryptocurrencies, and more are launching every month. With so much hype around the new cryptos – the scammer floats fake coins. Once you and many others invest in them, the scammers take away all the money.

To protect yourself from ICOs scams, you need to do what we do in every investment – research. You should not put your money in some ICO after you read an article on it without research. Try to search for crypto on social media. Try to find a white paper related to crypto. Try to see how many people before you have invested in the past. If you cannot find all this information, it is most likely a scam, and you should stay away.


Fraudulent Exchanges Just like there are fake coins, there could be exchanges. They will come overnight and lure you with attractive offers to invest through them. Mostly, people end up investing through them. Once these fraudulent exchanges have collected enough funds, they disappear. 

Sometimes, exchanges are too small and cannot stand the market demand and hence shut and run away as they can’t give you your money back. 

To protect yourself from fraud – before you join any crypto exchange, check the crypto community. Check its reviews, since when they are operating, their social media pages, etc. Try to find multiple confirmation sources, and the information should be consistent at all places. 

Ponzi Schemes One of the biggest Ponzi schemes related to crypto was related to mining. It was BitClub Network – they were supposed to do Bitcoin mining but never did. They ran a $722 million Ponzi scheme where they sold company shares of a fake mining operation. They committed to using funds to buy the mining equipment but never did.

To protect yourself from the Ponzi scheme, check the returns of the company or the offer. If the return is too consistent, it is likely a scam. 

Check the business plan if you are investing in a company. If it is not clear, it is most likely fake. If the company has no history and financial records, you should not invest in such companies.

Crypto Scams

Pump and Dump Schemes Like in the equity market, operators increase the price of a stock to attract the retail investors and finally dump the stock when retail investors invest and increase the price further. A similar thing happens for crypto coins. 

Operators artificially inflate the price, and when an artificial peak value is attained – the big investors exit. The retail investors get trapped in the process.

The price of small market cap coins can be manipulated. Hence, it is always better to invest in popular coins with history and a large market cap. They are too big for any price manipulation.

Social Media Scams You will come across pages and posts that will give attractive offers. For example, deposit ETH and get 2 in return. You will find such posts all over social media platforms. If somehow you feel the scheme is genuine and decide to invest – do a proper check. Check the account of such pages. If the account is newly created and has no followers, it is most likely a fake one. If there is a huge following but no engagement on the posts, it is again a fake one. If you have received a link in the mail, check the email address. Do you see anything fishy? If so, dig further.


Just like with any other investment, you should do proper research before investing. Scammers take advantage of your lack of knowledge. If you do your homework properly, your hard-earned money remains protected.

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