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SCAMS - Always know these 8 horrors before investing in Crypto

"If you told me, you owned all the bitcoin in the world and you offered it to me for $25, I wouldn't take it." - Warren Buffett

A hacker tries to lure a person from inside a computer using bitcoin as bait
Crypto Scams


The crypto headlines again soaring in the news.

Financial gurus are talking about it again due to rising inflation, increasing layoffs, and the recently started war in the Middle East.

So, a new opportunity arises for the gimmick sellers.

We are already wounded by the collapse of the FTX exchange due to Mr. Fraud aka Bankman Fried and the most perfectly claimed algorithmically secure TERRA LUNA coin.

All this happened because of our Prima Desire of Greed and Fear.

The meteoric rise of decentralized finance platforms led scammers to have an opportunity to make quick money on retail investors who lack deep knowledge of crypto and the psychology behind it.

Crypto is not a legal tender; instead, virtual currency is a “digital representation of value that functions as a medium of exchange, a unit of account, and/or a store of value.” 

So, it is now important to know these scams to prevent losses in future:

8 Crypto Scams to Watch

Let's all of them learn one by one.

1. Phishing

Phishing is perhaps the most common type of scam and is certainly not limited to crypto.

Phishers attempt to trick people into revealing sensitive information such as passwords or login details by posing as a reputable company.

In the case of digital currency, phishers will persuade people to give up their “private key,” which gives access to their digital wallets.

Phishing scams have become sophisticated over the past decade, meaning they look legitimate.

Be on the lookout for

  • weird text, links,

  • unofficial-looking email addresses,

  • grammatical mistakes, and

  • urgency to click the attachment.

Now these scams do not only occur within emails, but they also spread through random author comments in MEDIUM.COM articles to messages on WhatsApp and social media platforms such as X(Twitter).

2. Pig Butchering

This scam typically begins on dating sites, where a scammer lures a vulnerable fellow by using an attractive picture on their dating profile.

After gaining their trust, the scammer tells the victim about their success with a particular cryptocurrency.

Then convince them to invest in the cryptocurrency, directing them to a phony website where the “investments” the victim makes go straight into the scammer’s pocket.

In this scenario,

  • the victim is the “pig,” and 🐖

  • the scammer is the “butcher.” 🔪

Neither the name nor the scam is pleasant.

3. Pump and Dump

This is the scariest scam in the crypto industry and people become from hero to zero.

In “Pump and dump” scams cheap crypto coins are offered for a fake promise through complex algorithms with nice-looking illustrated pictures in brochures typically selling for less than $0.5 per coin.

The scammers attempt to publicly hype (viral marketing) the crypto by utilizing multiple mediums to pump the coin value through:

  • Blogs,

  • Social media,

  • Word of mouth, and

  • Ads mobile apps.

After that public also called Mr. Market by Charlie Munger (retail investor) mindlessly invested a significant amount of money into the crypto, then at the right time scammers dumped or sold all the crypto, reaping a profit and leaving the investors to suffer.

4. Rug Pull (Technical lock)

Although “pump and dump” and “rug pull” schemes are relatively similar, “rug pull” schemes often do not allow public investors to sell their crypto at all, meaning they are left with nothing after the scammers sell their crypto.

The most prominent example was in the news about a relatively new cryptocurrency named Squid Game, which gained popularity after the Netflix series, disallowed the selling of the currency.

"SQUID", the ticker for the coin, began selling at one cent, then rocketed above $90, before immediately plunging back toward zero when the scammers “rugged” the masses.

It was the ultimate horror story a real-life squid game experience. 😱

5. Mining

Mining is a different kind of scam looks like promoting business or entrepreneurship through ASIC machines running on cheap electricity. (Kodak tried this in 2017).

As we know, 19 million bitcoins are already produced.

The extra 6.25 produced every 10 minutes are like a drop of water in the bucket of the entire supply so the cost to produce this new bitcoin is irrelevant. On comparison, Bitcoin is completely different to a commodity like oil. With bitcoin,

  • 6.25 no of bitcoins, every ten minutes are produced regardless of price, and

  • bitcoin is never used up as compared to oil which is used up constantly.

Also, if the price of oil goes down below cost, companies stop producing oil, restricting supply.

As a result, the price goes back up to above cost following Law of Demand and Supply.

Bitcoin’s production cost is used as a way of calibrating how much further it can fall. The production cost is mainly the electricity needed to operate the powerful computers that run the Bitcoin network.

So, if the price of Bitcoin further falls miner will stop producing the Bitcoin unless they have money to hold.

6. Insider Dealings,

In the case of FTX, they lend loans to Alameda Research for trading on the money of FTX depositors and clients.

Also, FTT tokens have no value other than promises and fake trust.

Half of the money on the FTX balance sheet was not liquid assets or stored as acceptable Tenders such as USDC (USD Coin) or USDT(Tether) which are backed by USD.

The result: We have seen a massive fraud in the history of cryptocurrency.

7. High leveraged assets

Another scam or fraud is supporting trading on leverage or margin

Allowing traders to use money 10x of their real deposit as a loan appears legitimate but, with no regulatory oversight nor controls.

Generally, the trading is manipulated and ultimately trader loses his capital.

Ultimately the house always wins.

8. Non-compliance

Finally, the story of LUNA was created by Terraform Labs which created the UST coin to be an algorithmic stablecoin on the Terra network.

While other stablecoins (USDC or Tether) are fiat-backed, the UST was not be backed by real assets.

Instead, the value of UST would be backed by its sister token, LUNA.

Stablecoins are supposedly safe havens in the crypto space since they’re meant to have a fixed value of around 1 USD.

Luna was Terra’s blockchain native token, similar to how ETH is used on the Ethereum network.

The Luna crypto crash was caused by its connection to Terra USD (UST), the algorithmic stablecoin of the Terra network.

It happened because of a sudden call from investors on UST which crashed both the coins to rock bottom.

It is concluded that there must be a portfolio of stablecoins to be maintained as reserves behind each coin.


Crypto is a confidence game with the excitement of

  • gambling,

  • viral marketing of a pyramid scheme, and

  • the fake profits of a Ponzi.

After FTX and LUNA, there is much more need for tightening the regulations against

  • crypto sphere,

  • firms and exchanges,

  • influencers and

  • non-compliant promotions.

Thanks for reading and if you really like this article, please share it with your social circle.


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