The rising popularity of cryptocurrency in recent years has unfortunately opened the door to numerous fraudulent schemes. In 2021, scam losses totalled $7.8 billion, with crypto exit scams accounting for over one-third of that amount. Crypto exit scams and hacks have cost people billions of dollars each year. Here’s what you should know about crypto exist scams and how to make sure you’re not among them.
Also Read; Biggest Crypto Exit Scams Till Date
What Are Crypto Exit Scams?
Cryptocurrency promoters who vanish with investor funds during or after an ICO are said to have committed an “exit scam.” In this scheme, advocates of a new cryptocurrency platform launch the platform, market the currency and concept, raise capital from investors, potentially run the business for a short period, and then vanish, taking the investors’ money with them.
How To Avoid Exit Scams
Most investors who get into the space now, when it’s already pretty developed, will want to know how to tell which projects are real and which ones aren’t. Here are some things to remember about exit scams:
• Team credibility assessments. The most challenging aspect of the virtual world is accountability and ownership. Before investing your hard-earned money in ICOs that may appear to be very promising, you must verify the crypto team’s credentials. Therefore, you should conduct a simple background check on ICO promoters, cryptocurrency project backers, and their connections/followers.
• Check the project’s foundations before acting hastily to buy tokens that a favourite influencer is promoting. Frequently, the project is merely a “copy” of an existing solution at a lower cost, with no solid foundations for future expansion.
• It is also essential to make sure their documentation meets the standards. A cryptocurrency project’s white paper is a crucial document that describes the project’s goals, development process, and expected revenue generation. White papers that are difficult to understand, full of jargon, and riddled with contradictions should raise red flags with any investor concerned about a possible exit scam.
• Conduct research regarding projects that offer above-average returns. Some may be legitimate, while others may be hazardous. In particular, be sure to educate yourself on staking, yield farming, and high-yield savings accounts for cryptocurrency. Ensure that you utilize price tracking platforms such as CoinGecko frequently to obtain the most recent information and research materials regarding the tokens of interest.
• Hold off on making a purchase if you’re considering it but experiencing solid urges to invest in a particularly appealing project. You should wait at least a week to see where the price goes.
Takeaways
Even in the long-standing stock markets that have been in place for centuries and are subject to strict regulation, fraud and scams are not uncommon. Due to its unregulated nature, the cryptocurrency world is anonymous and carries additional risk. The burden of ensuring that one’s investment capital is protected ultimately rests on the shoulders of the investor. Before putting money into a business with a lack of a solid team, unrealistic projections of profit, or a murky business model, it’s essential to scrutinize these factors.
