United States – Cryptocurrency is not a secured investment by the government, which is why it’s important to be cautious about the red flags surrounding your preferred altcoin. Here are some red flags that you should be aware of before purchasing.
You might have considered growing your savings through cryptocurrency as inflation rises, but it’s important to be extra cautious in investing. As per FTC, over 46,000 individuals lost more than $1 billion in digital asset scams since last year, where an individual lost $2,600.
Since cryptocurrency is not a government-regulated type of investment, there’s no protection unlike checking or savings accounts. It’s important to spot red flags of cryptocurrency scams before you become a victim.
An impractical claim is one sign of a cryptocurrency scam. If you notice a site that sells cryptocurrency claims that are too good to be true, it probably is a scam. You should be cautious of any offer that creates promises without the assurance of getting a return. One sample is when an ad tells you you’ll get a return that’s 10 times your investment in a shorter period. You should find this ad skeptical.
You should also find it skeptical if the cryptocurrency altcoin is not part of major exchanges, like Gemini and Coinbase. If an altcoin is not part of these exchanges, there’s a big chance that what you’re about to purchase is a scam.
Another thing to consider is the ICO or Initial Coin Offering paper. If you notice that the ICO paper has shorter details, it’s best to avoid investing your money. You should look for ICO papers with concise and clear information about the cryptocurrency project. Moreover, if an ICO project doesn’t have a whitepaper at all, it’s undoubtedly not a good investment. It only means that the team doesn’t have enough experience to handle such project.
Another behavior that may result in a bad outcome is when the ICO displays signals of pump-and-dump behavior. The schemes inflate the cost of the cryptocurrency, so investors will increase the price. This behavior draws new investors until the owner sells everything, leaving investors with nothing. Pump-and-dump situations are illegal and fraudulent, especially in the stock market.
You’ll also know it’s a skeptical investment if the community of this project is inactive and small. Knowing the community of the crypto project you’re eyeing is important is you can assess whether the community is supportive and strong. A small one will display a lack of belief or interest in the cryptocurrency project.
Lastly, check whether the code is open-source or not. Transparency is very important when investing in a cryptocurrency project. It’s difficult to know more about the project if it lacks transparency.