How to avoid crypto scams

*Disclaimer: this article should not be treated as financial advice and has solely been created for educational purposes*

Advice on managing your finances can be found on the Student Intranet. 



Cryptocurrency has become a popular investment option in recent years, but since 2021, cryptocurrency scams have stolen more than £14 billion (!), according to the Federal Trade Commission (FTC), thus it is important to know whether a crypto project is reliable and whether it is safe to invest in it.

A classic scheme that scammers use is that they create a new coin, which gets heavily promoted. Their intention is for that coin to increase its price so that later the scammers can sell all of their holdings and earn a lot of money. Unfortunately, when such a sell-off happens, the coin loses its value, sometimes getting even lower than its initial price. All other coin holders who did not sell the coin at its highest point lose their money.

So, to avoid these scams, it is essential to…

… research any cryptocurrency you are interested in. Check what other people on the Internet think about it, does it have any use, and what is the reason it was created. Serious projects will have serious and extensive White Papers with citations, as well as explain the code, and the value the cryptocurrency will bring. Scammers would usually only stress high returns and getting rich quickly.

… recognise phishing attacks. These attacks try to trick you into giving away your password or private key. To avoid that, it is important to always use a secure internet connection, not click on links or download attachments from unknown sources. Additionally, always look for the "https" in the website address.

… never send money to someone you don't know. If someone contacts you offering an investment opportunity it is best to simply ignore the offer. Usually, the messages that scammers send do not look professional and have grammar mistakes, but even when they do look professional, you should still research whether the opportunity is real.

… use a reputable cryptocurrency exchange. Check whether the exchanges are regulated and have the measures to protect your funds. Additionally, they should also have customer service teams that can help you in case of any issues.

… use a hardware wallet to store your cryptocurrency, as this is the safest way to keep your funds secure.

In conclusion, cryptocurrency scams are becoming more prevalent as the crypto popularity continues to grow. To protect yourself, thoroughly research any investment opportunity, be aware of phishing attacks, avoid sending money to people you don't know, and use a reputable cryptocurrency exchange and hardware wallet. By following these guidelines, you can help ensure that your investments in cryptocurrency are safe and secure.

Financial advice, including managing your money during the cost of living crisis, can be found on the Student Intranet. If you feel you need further support, you can contact the Student Advice and Money Team here.