How to protect your money from Crypto Scams
Welcome to the latest issue of CapitalRollup Digest! Today’s digest is for May 26th and it should take you about 5:00 minutes. We’ll get right to it.
- What does the Market Look like today? (Top 5/10 popular Cryptocurrencies)
How to Spot a Crypto Ponzi Scheme: 5 Red Flags to Check For
Ponzi schemes appear every now and then with the same aim: to separate people from their money. It really sucks to become a victim of these scams. There are ways to determine whether the latest investment plan you found is actually a Ponzi scheme. Let’s take a look at how these schemes work and why they happen.
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What is a Ponzi Scheme?
It is a type of investment fraud where old investors are paid with money brought in by new investors. for example, a business that promises to double people’s money in a short period of time. Their only task is to invest a certain amount of money in the business and wait, but they don’t provide a real service and have no assets. You are therefore not investing in anything real when you invest.
Ponzi organizers repeat this cycle until they can no longer attract new investors. Eventually, they run away with investors’ money, and the scheme crashes.
How do Crypto Ponzi Schemes Work?
Traditional Ponzi schemes and crypto Ponzi schemes function similarly. Rather than investing in traditional businesses, people invest in crypto models that are fake.
Fraudsters use Crypto Ponzi schemes to take advantage of the fact that people don’t really understand cryptocurrencies and blockchains. Additionally, some of them claim their cryptocurrency is “the next Bitcoin”, which promises high returns for investors.
Crypto Ponzi schemes also depend on money from new investors like their traditional counterparts.
Are Ponzi Schemes Popular in the Crypto Community?
Onecoin was a popular crypto Ponzi scheme that ran from 2014 to 2016. Investors were rewarded according to the number of materials they sold and the number of people they registered.
Additionally, investors received the Onecoin cryptocurrency, which seemed valuable at the time.
There was no independent blockchain for Onecoin, and people could only trade the coin through Onecoin’s exchange. In addition, the amount of Onecoin you could sell on the exchange depended on your “package level”. Until different countries raised alarms about how the company was operating, this didn’t seem odd. Ruja Ignatova, the founder of the scheme, fled and investors lost more than $5 billion.
There are many Ponzi-type schemes out there, and Onecoin is just one of them. So it’s important to learn how to spot them and avoid them.
How to Spot a Crypto Ponzi Scheme
Here are 5 red flags you should watch out for during your research:
- High Returns with Little or No Risk
Investment risk is a measure of the probability of an investment failing or succeeding. There are risks associated with all types of investments. Investing in any asset, especially cryptocurrencies, is impossible without risk. Investing in any asset, especially cryptocurrencies, is impossible without risk.
Riskier investments are those that promise higher yields. It is also important to note that not all investments are profitable. It is important to be cautious when investing in any asset class, especially cryptocurrencies.
2. Guaranteed Returns
Crypto Ponzi schemes promise you guaranteed returns in order to persuade you to invest. However, there are no guarantees in the investment world. For instance, what if a meteor falls from the sky? Wouldn’t cryptocurrencies and other assets drop in value?
Okay, so maybe we exaggerated a little bit. However, it’s impossible to predict how the market will behave all the time, especially in crypto markets. However, it’s impossible to predict how the market will behave all the time, especially in crypto markets. A tweet from an influential person can affect the price of a coin. Crypto projects that guarantee profits are a red flag you should avoid.
3. Consistent High Performance
It may surprise you, but an investment that always returns high profits is a red flag. The cryptocurrency market is wildly volatile and prices are never stable.
You should be wary of crypto profits that never fluctuate, even when the markets are bad. There is a high probability that they are paying investors with money from new investors.
4. Unregistered Investments
It is generally expected that investment platforms will be registered with the state or country government regulatory bodies. Crypto investments that are unregistered should be viewed with caution. That’s definitely a red flag. You should also find out who the founders are.
5. Pressure to Invest
Conducting your own research before investing is crucial. Research can help you determine whether the investment is real or not, but good research takes time. You should probably avoid investing until you do your own research if you are pressured to do so.
Also, beware of projects that don’t let you withdraw your money completely. Keep in mind that crypto Ponzi schemes require members’ money to operate. Be mindful if you encounter any of the following:
- You cannot liquidate your coins and withdraw your money.
- When you try to liquidate your coins, the investors promise you higher returns.
It may be hard to spot cryptocurrency scams, but knowing more about cryptocurrencies and how they work will help you avoid falling for them. Always do your own research and be aware of the five red flags we discussed.
•Trivia 🤔
Crypto is part of a system that does not rely on a single person or organization. What is this term known as?
A. Technological
B. Advanced
C. Decentralized
D. Unconnected
Find the answer in the next issue of CapitalRollup Digest 😉
Answer to yesterday’s trivia was B.) False
Crypto Word Of the Day!
💡 Cryptojacking
Cryptojacking is described as the unsolicited use of a person’s device or system, such as a computer, server, smartphone, tablet, etc., for crypto mining.
The term used in a sentence:
— ‘’Some measures to avoid falling victim to cryptojacking schemes include the use of ad-blockers and anti-crypto mining extensions.”
- Community Update 📢
We will be organizing a Twitter Space session soon with 5 industry leaders where we will discuss the crypto markets and everything on web3. You can look forward to it😎
•What We Are Reading Today 📰
Turns Out Crypto Investors Can Also Fall For a Ponzi Scheme. Read more
Signs your crypto investment may be a Ponzi scheme. Read more
Learn and invest in Crypto with friends 💰
Earn unique rewards when you invite your friends to start investing profitably with CapitalRollup.
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