The crypto frontier opens new corners of investing, creating a massive potential for significant returns. However, there is also the great risk of losing money to crypto scams. One such case has been the SQUID crypto scam, in which investors lost $2 million+ in a crypto rug pull.
One of the reasons why there is a considerable loss of money through scams is that many people still do not understand the crypto space. Additionally, the market is also so volatile. Investors can increase their portfolio's security by avoiding red flags of crypto scams and rug pulls.
The Most Common Types of Crypto Scams
Some of the common cryptocurrency scams today include:
Phishing scams
Crypto ATMs
Initial Coin Offerings
DeFi rug pulls
Attackers also use romance and giveaway scams to pull off crypto fraud.
Warning Signs of a Crypto Scam
There are several ways to identify a rug pull or a scam in a crypto project. Here are some ways;
Suppose the said developers are very arrogant and aloof. Scammers and conmen have an inflated sense of confidence and are very bullish about the products they are building. They don't show humility, nor are they connected to the community. Additionally, they love to flex made-up things they have allegedly accomplished.
The developers flex to have deep pockets. Many scammers often appear to be wealthy developers. They are constantly flexing their wealth, including wallets (that they prob built up via scams).They also promise to utilize high-tier celebrities and unrealistic partnerships. Big cappers!
They flex prior accomplishments. There is always an elaborate unrealistic story of having "massive businesses" or prior accomplishments. Typically, outside of crypto.
They cannot answer questions. As with anyone with complex visions and a complex system, an owner should anticipate complex questions. Scammers cannot give clear answers as they haven't thought out how the process will work.
Cannot disclose processes. Many conmen will fluff processes and partnerships but give no details. They will say, "These partnerships are so big I'm contractually limited to disclosing any details." "I would love to speak on this, but I legally cannot."
Poor Liquidity. This is a more critical factor to look at. Scammers launch with some mediocre liquidity as they have no actual plans. Besides, a vast vision should include colossal liquidity.
No white paper- While white papers are often delayed, a well-thought-out team with a superb vision should have a white paper or light paper on day 1. The lack of one is very sus. The white papers may alternatively include lofty/unrealistic goals.
Very basic website.
Easily coerced into ideas and agree with a lot of feedback. Since there are no plans for a long-term building, conmen are always "yes, man." They have zero issues overcommitting as there's no sustenance there. Anything to appease the community, they'll promise it.
Takeaway
Although cryptocurrency and digital assets are growing in mainstream acceptance, most experts recommend keeping crypto investments at or below 5% of your portfolio (or whatever you can afford to lose).
Watch out for the warning signs when investing in cryptocurrency, and ensure the coin is legitimate before parting with your cash.
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