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Safety & Scams

How to protect yourself and avoid scams while investing in cryptocurrencies

Since Bitcoin has gained popularity, there are many websites who claim to ‘sell’ bitcoin but be careful! Many of these websites are scams, even though they’re very well designed! These websites usually target the newer generation of bitcoin users because they lack information about the industry. Since there’s a lot of fakes and novices, we at felt the need to create an all inclusive list of 10 golden rules to avoid scams!

Rule #1: Do Your Research

Always do your research on the platform you intend on using! You can find pages on reddit where people review the exchange. People who get scammed share it with the reddit bitcoin community so you can make sure the exchange you use is trustworthy. You can also find some reviews of different platform here.

Also, read and learn as much as you can about the coins that you invest in! The last thing you want to do is invest on a trustworthy site but in a volatile coin, which might fail. Therefore, make sure that you understand the volatility and buying price of the cryptocurrencies that you invest in. This will go a long way in understanding which currencies to invest in and which ones to avoid.

Rule #2: Check Ratings

If you’re using a peer-to-peer exchange platform, look for a seasoned seller with several positive reviews. If you see positive reviews on a seller’s profile, that indicates that previous buyers have generally been happy after buying bitcoin.

However, be careful because some websites have fake sellers with fake reviews, be sure to read them to make sure they’re real. Firstly, this will help you make sure your payment will be complete without any issue and helps to avoid scams.

A rule of thumb to judge where to buy cryptocurrencies is that if something is too good to be true, it usually isn’t. If you find a seller with some bad reviews who makes you an offer, it’s best to stay away because that’s how scammers lure younger bitcoin enthusiasts.

Rule #3: Use Escrow Accounts

Escrow accounts are the best way to avoid scams, they’re third party accounts which hold bitcoins until the payment is complete. As soon as the payment is confirmed, the escrow account transfers the bitcoins to the buyer so that there cannot be fraud. For example, a scammer could ask you to send bitcoins first, after which he would send you money.

This usually doesn’t work though, since the scammer could practical disappear after you send the bitcoins. In order to avoid being scammed – a solution that is best for sellers as well as buyers – are escrow accounts for every transaction in cryptocurrencies online.

Rule #4: Stay Away from Bitcoin Multipliers platform

Stay away from any kind of deals that sounds too good to be true. Many platforms promise to multiply the number of bitcoins you have just by logging in with your Coinbase account. These are scam! However, platforms like Plus500 or eToro will let you make some profits even if your cryptocurrency is going down. This is what we call CFD Trading. It works by exchanging the difference in the present value of bitcoins and its value in a near future

Rule #5: Should I buy alt-coins then?

Alt-coins, or alternative coins, are other cryptocurrencies such as LiteCoin or DogeCoin. These currencies are traded 24/7 and are volatile which means they can be the source or really high profits!

Buying large amounts is a risk that can pay, however before investing in alt-coins you should read a lot about them. Their purpose, their technology and the team behind it. Keep in mind that the risk on these coins are higher than with Bitcoins or Ethereum.

Rule #6: Use a physical wallet

A physical wallet can be like a USB which stores your private keys. Up till date, it’s the safest means of storing your bitcoin and making sure that nobody is able to hack into it unless stolen physically. A software wallet can be prone to hackings since it’s connected to your mail. If a hacker has access to your mail, he can basically now transfer your bitcoins and sell them later on. It’s pretty hard to track down a stolen bitcoin since nobody really shows their private key and the only way to recognize one bitcoin to another is that private key. So, be safe and buy a physical wallet for storing your cryptocurrency! We have reviewed all the safest hardware wallets here.

Rule #7: You must enable 2-factor authentication (Google Authenticator)

Security is one of the most important things in the world of cryptocurrencies. Since emails are quite easy to hack, it’s pretty easy to just hack your account and transfer all your bitcoins to another. 2 Factor Authentication allows you to avoid this.

A 2-factor authentication is essentially like giving your bank a phone number so that when you need to verify a transaction, the bank sends you a text with the verification code. It’s as simple as that and prevents most hacking.

Rule #8: Make sure the platform you use is regulated

Before using any website or any exchange platforms, make sure that they are regulated by some kind of financial authority. This will help you if you encounter a major issue and have to take the company to court. Since the company is regulated, there cannot be any tampering and you will be safe. However, if it isn’t, there’s good chances that you might never see your money again.

Rule #9: Don’t connect from a public wifi network

I’m sure some of your friends might have told you this, it’s pretty straightforward to hack into someone’s computer if logged onto a public wifi network. Be careful to not use any of your cryptocurrency information on a public wifi network, since the connection is not secure, anybody can view the data on the network.

So, if you log into your account on an exchange website, a hacker might be able to see your information. Avoiding using public networks will make sure that you avoid any sort of hacking over public networks. If you do have to use a public wifi network, make sure your passwords aren’t saved in your browser cookies. If they are it’s quite easy to access for someone infiltrating your data.

Rule #10: Don’t talk too much about it on social media

There’s the story of a blogger called Cody Brown who was hacked and over $8,000 worth of cryptocurrencies were stolen from his account. The hacker got access to his gmail first, then sent the currencies to different accounts, because he did not have 2 factor authentication on his Coinbase account. Even though there’s a lawsuit against his provider and Coinbase, but there’s not many things they can do now.

A question that rose was that how did hackers know he had an account on Coinbase? A tweet.

He tweeted out in support of a person who had issues with the website and got hacked about a week later. So be careful about your social media, hackers can specifically target people who they believe have significant investments on their accounts.

That’s it, make sure you respect these 10 rules, before opening your trading account. If you need help check-our 3 steps guide: here.