Cryptocurrency Trading Risks

Cryptocurrencies are popular. More companies are accepting bitcoin and other digital currencies as payment and cryptocurrencies are catching up with forex as a dominant trading asset. Along with the excitement of cryptocurrencies, there are also significant risks. It is important to be aware of these risks before getting involved in any crypto trading deals. 

Crypto Trace’s team of experts in the financial field knows what to look for when investigating brokers and how to spot early signs of problems. Consult our reviews if you want to work with a crypto broker but want to know if they are reliable and legitimate.

How Cryptocurrency Works?

Cryptocurrency is a digital currency, which means there is no physical equivalent. It exists entirely online and all cryptocurrency transaction is on the blockchain. Trading cryptocurrency works like trading any other asset. Some brokers provide cryptocurrencies along with forex, precious metals, and stocks. Other traders prefer to work directly with a cryptocurrency trading platform.

Why Is Cryptocurrency Risky?

Cryptocurrency, like any trendy trading product such as forex, can be risky. The following are some reasons

Ransomware and Blackmail Schemes

One of the leading types of crypto scams occurs when people pretend to be celebrities on social media. One 17-year-old Floridian managed to take over Barack Obama’s, Elon Musk’s and Bill Gates’ Twitter accounts and offered fake crypto deals. 

Of course, many people believed the messages were legitimate since few could imagine that people like Bill Gates would not notice his account had been hacked. The scam was stopped in a few hours and the 17-year old stood trial, but not all social media imposter scam victims are so lucky, and many of the culprits are still at large.

Cryptocurrency Is Volatile

Trading cryptocurrency is a high-risk proposition because as an asset, it is extremely volatile. Bitcoin moved from $10,000 in October of 2020 to $60,000 in spring of 2021 and after falling back down significantly has settled at the beginning of 2022 at around $50,000. 

Bitcoin is actually less volatile than many other cryptocurrencies. One reason digital currencies fluctuate so much is that there is still much uncertainty and skepticism that surrounds digital money. Valuation of these assets seems subjective and they can move according to the headlines. 

Cryptocurrency Is Unregulated

The fact that cryptocurrency is not regulated by a central bank, unlike other types of currencies seems like a distinct advantage to many people. However, the lack of regulation means that manipulation and fraud can go unchecked. 

 Although governments are talking about regulating cryptocurrency and are even issuing their own coins, it is not clear how they are going to establish their authority over the blockchain with its unique properties and anonymous transactions.

Transactions on the Blockchain Are Anonymous

There is some degree of transparency with cryptocurrency transactions in the fact that all of them are recorded on the blockchain and can be seen by anyone. However, one major difficulty in figuring out who you are dealing with on the blockchain is that all transactions are anonymous. 

Many argue that anonymity on the blockchain enhances security, but if merchants and brokers hide their true identities, this can also threaten trader security. Fortunately, fund recovery experts have found ways to unmask cryptocurrency schemes on the blockchain and use technology and investigative methods to figure out who is making the transactions. 

However, individuals who are new to cryptocurrencies are usually not able to accomplish this type of sleuthing and should seek fund recovery assistance to track down the people behind the transactions.

The Problem of Crypto Scams

Like forex, there are many inherent risks in crypto trading. The market itself is volatile. Add to that, unlike forex, cryptocurrencies are not regulated by a central bank. The anonymity on the blockchain can give unscrupulous brokers a chance to disappear with funds. 

In addition to all of these problems, the problem of crypto scams keeps growing. According to CNBC, $7.1 billion was stolen in crypto scams in 2021, which was an 81% increase over 2020. Considering the fact that 2020 itself was a year that saw a huge rise in cryptocurrency activity, including fraudulent schemes, this is a negative trend that doesn’t show signs of slowing down. 

Before trading cryptocurrency, it is important to be aware of the most common types of cryptocurrency scams so you can avoid them.

Social Media Imposter Crypto Scams

One of the leading types of crypto scams occurs when people pretend to be celebrities on social media. One 17-year-old Floridian managed to take over Barack Obama’s, Elon Musk’s and Bill Gates’ Twitter accounts and offered fake crypto deals. 

Of course, many people believed the messages were legitimate since few could imagine that people like Bill Gates would not notice his account had been hacked. The scam was stopped in a few hours and the 17-year old stood trial, but not all social media imposter scam victims are so lucky, and many of the culprits are still at large.

Romance Scams

People look for love online, but they also try to falsely convince people that they are interested in dating and instead get them to surrender bitcoin codes or keys.

Ransomware and Blackmail Schemes

This occurred during the Colonial Pipeline affair, in which cybercriminals hacked their way into control systems and shut down service until they were given $4.4 million in bitcoin. The FBI eventually caught them and returned the funds. There are also many blackmail scams involving cryptocurrencies.

Fake ICOs

Initial Coin Offerings or ICOs may seem like an exciting opportunity to be one of the first to invest in a new type of digital coin, but in reality, 80% of ICOs are fake. Research who is behind the new coin and invest in ICOs only on a regulated platform.

 

Fake Crypto Wallets and Platforms

A crypto wallet may seem like the best solution to keep your digital coins safe, but fake wallets are designed to steal data. Research carefully before purchasing a bitcoin wallet.

 

Unregulated Brokers

Before trading cryptocurrency, ensure your broker is licensed by a top-tier regulator and has a reputation for reliability. Do careful research before signing up with a broker.

How to Stay Safe Trading Cryptocurrencies?

Following these measures will keep you safe when trading cryptocurrencies. However, if you have lost money in a trading scheme, it is important to seek fund recovery assistance. Crypto recovery is becoming more successful as investigators and professionals refine fund recovery efforts on the blockchain.

If You Have a Complaint with a Crypto Broker, Talk to Crypto Trace Experts Today

Don’t go it alone. Crypto Trace experts have worked with numerous clients on crypto intelligence reports and have created successful outcomes. It is important to report Crypto scams immediately after they are discovered to improve the chances of retrieving your funds. 

Consult with Crypto Trace experts today and provide a full account of what happened so we can get started drafting an intelligence report. The sooner we can help you, the more likely it is that your crypto broker complaint will have a positive outcome.