Cryptocurrency Scam Warning


If you are planning on investing in bitcoin or other digital currency (cryptocurrency), then read this cryptocurrency scam warning first!  

Learn what is a cryptocurrency scam before you spend your money. If you are unfamiliar with common online scams, then read the 9 scam warning signs here.

First of all, I took the plunge into cryptocurrency, buying both Bitcoin and Ethereum. I bought $30 of Bitcoins and $10 of Ethereum. Not large dollar amounts by any definition.

Understand the risks of investing in digital currencies.

Many financial advisers and experts recommend diversified investment portfolios to maximize returns based on an investor’s risk tolerance. Some advisers recommend small riskier investments in precious metals, for example,  based on Modern Portfolio Theory

I bought some out of curiosity and chance that cryptocurrency may actually turn out to be good investment.

Would I do it again?

A qualified YES!

I will tell you why shortly.

What is a cryptocurrency scam

A cryptocurrency scam is any scheme or activity that deceives, tricks, cheats you out of your money in exchange for the promise of financial gains with cryptocurrency.

Typical cryptocurrency scams include:

  • Pyramid schemes
  • Pump and Dump
  • Initial Coin Offerings
  • Fake cryptocurrency coins
  • Dishonest exchanges

Cryptocurrency pyramid scheme

Cryptocurrency scams can take the shape of these pyramids

Pyramid schemes, including Ponzi schemes, are increasing rapidly online, particularly in the make money online niche. Business opportunity promoters are recruiting members to join networks. New members are required to pay membership fees to invest in cryptocurrency. Also, members receive financial incentives to grow the network instead of making sales.

Early in 2017, OneCoin representatives were arrested, convicted, and sent to jail for running a cryptocurrency Ponzi scheme. They had grabbed $350 million from investors.

Pump and dump

Jordan Belfort, “the Wolf of Wall Street”, was convicted and jailed for running a securities pump and dump operation. The same sort of thing is going on with cryptocurrency. The Business Insider reports pumping and dumping is widespread within cryptocurrency exchanges.

As the Wolf did, cryptocurrency traders are buying cryptocurrency at low prices and then artificially manipulating the prices and promoting them to unsuspecting investors.

Initial Coin Offerings

Initial Coin Offerings (ICO) are the cryptocurrency market equivalent to the stock market Initial Public Offering (IPO) of stock.

An ICO is a way to raise funds by issuing a new digital coin (cryptocurrency). The new digital coin is exchanged for either cash, bitcoin, or other digital coin.

Initial Coin Offerings are like stock IPO's selling digital coins to the public for the first time.

Celebrities like boxer Floyd Mayweather and Paris Hilton may be trouble with the SEC over the endorsement of ICOs. The SEC has also filed fraud charges against PlexCoin.

Bloomberg Research reports that over 80% of Initial Coin Offerings in 2017 were scams. This report substantiates that an ICO carries a significant risk that participants will lose their investments.

Fake cryptocurrency coins

If you have spent any time in the make money online niche or been looking for ways to make money online, then you may have seen social media ads or email ads promoting bitcoin, ICO, or digital coin opportunities.

Scammers and unethical marketers are taking advantage of people by promoting fake coins or opportunities. The Swiss authorities recently closed down a fake coin operation and are investigating other possible fraud schemes.

Dishonest cryptocurrency exchanges

First of all, a cryptocurrency exchange is a digital marketplace where people can buy and sell cryptocurrency using different fiat currencies or alternative coins (altcoins).

Since the cryptocurrency market is so unregulated, it is difficult to determine the trust worthiness of any cryptocurrency exchange, particularly new ones. Mt. Gox was one of the largest cryptocurrency exchanges until they stopped trading coins in 2014. They lost 850,000 bitcoins over a period of time to thieves.

Cryptocurrency Exchanges

If you are looking for information about exchanges, then this guide may be of help to you.

Here is a very short list of cryptocurrency exchanges (the ones I have seen) that I would consider using:


  • Coinbase - I use this one.
  • Uphold - I use this one as well since it exchanges fiat currency.
  • Kraken
  • Bittrex
  • CEX.IO

Here is why I may not invest more in cryptocurrency

1. Scams – There is not a way to evaluate offers being made. So many programs are overly hyped offering promises of riches without effort. Programs focus on recruiting new members instead of the sale of product or bitcoins.

2. Bubble – The cryptocurrency market occasionally acts as if the pricing bubble is about to pop. Trading volatility and froth reflect pricing uncertainty and high risk due to speculative pricing. The cryptocurrency charts reflect the speculative nature of cryptocurrency pricing. The fact that celebrities are creating their own coins are fueling the frenzy.

3. Liquidity – It may be easy to buy cryptocurrency. Selling it not so much. Transaction fees per trade have tripled recently. And may go up again. Also, given the hug surge in trading volume, the cryptocurrency market infrastructure cannot keep up with demand. Coinbase acknowledged their computer systems were overwhelmed and need of update to handle the volume. Furthermore, the Electroneum mobile application shut down for a system update to improve security. This left its members without access to their cryptocurrency for a few weeks.

However, the U.S. based Chicago Mercantile Exchange is planning on launching bitcoin futures for trading on the CME. Bitcoin futures enable investors buy into the digital currency market without directly investing in the cryptocurrency. This has been ongoing for several years. But 2019 may be the year we see a Bitcoin Exchange Traded Fund (ETF).

If you must invest in cryptocurrencies

Follow these cryptocurrency investment tips:

  • Invest in amounts you can afford to lose in its entirety.
  • Do your due diligence, homework.
  • Manage your expectations. Expect to lose it all.
  • Stay with the major exchanges and cryptocurrency.
  • Expect price volatility. The charts already show that. Price direction is not one way.

Following these tips may help you avoid cryptocurrency scams.

I appreciate any and all comments about cryptocurrency scams or your experience with cryptocurrencies. Please fill in and submit the form below.

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