Scammers hit cryptocurrencies

A LETHAL COMBINATION

The buzz around bitcoin and Ethereum has created the perfect environment for crooks to thrive in.

Bitcoin and Ethereum are cryptocurrencies that have been reaching record highs. Since the start of 2017, the value of a single bitcoin has risen from $968 to peak at over $3 000.

Ethereum has experienced an over 5 000% rise, climbing from $7.98 on January 1, to its current price more than $400.

Unfortunately, the buzz around bitcoin and Ethereum has created the perfect environment for crooks to thrive and few people really understand how cryptocurrencies work.

Bye bye bitcoin

These scams broadly take two forms – they either try to separate people from their bitcoins, or from their money, using bitcoins as the lure.

In the former category, the simplest scam is phishing. Crooks use the bitcoin brand to appear legitimate and get people to share their private bitcoin keys, then make off with their currency. Cryptocurrency transactions are irreversible. If you give someone else your private key and they use it to steal your currency, you’ll never get it back.

A more sophisticated scam is to hide malware in fake bitcoin wallets or even in fake bitcoin user surveys. Often these are posted on social media to draw people in, and once they click on the link a virus is downloaded that steals their private bitcoin information, allowing the crooks to steal their currency.

Get rich quick

More concerning are the scams exploiting the rise in bitcoin’s value to lure people in with promises of quick and spectacular returns. Often these are pyramid or Ponzi schemes.

It’s easy to sell someone bitcion or Ethereum by pointing to the huge growth in their prices in just a few months.

However, never forget the truth that past performance is never an indication of future returns – particularly not when you’re dealing with something as speculative as cryptocurrencies. Just this week the bitcoin price fell 10% in an hour.

Cryptocurrencies are highly volatile and there are no guarantees as to their future growth. Anyone offering any kind of guaranteed return by “investing” in them is therefore undoubtedly a scammer.

Beware of “bitcoin investment schemes” that pay out regular returns. These may seem to work for a while, but like any Ponzi scheme they will inevitably collapse and the scammer will disappear with the money.

Also be cautious about bitcoin mining. This is trickier as there are legitimate bitcoin cloud mining operations that charge users a fee and pay out rewards, but there are also a large number scams in this space that are nothing more than Ponzi schemes.

If you are really interested in bitcoin mining, do thorough research to identify legitimate operations managed by properly established businesses and run by identifiable people.

You’re probably better off steering away from anything that employs direct marketing or hard-selling tactics, or makes use of seminars where the opportunity is presented as a sure thing.

If you don’t understand something, don’t invest in it.