Bitcoin’s massive success has attracted millions of users and investors globally. Unfortunately, it has also attracted hackers and scammers who are trying to steal people’s bitcoin holdings.
Read on to discover the most common bitcoin scams you need to avoid.
Phishing Email Scams
If you are spending time online, you will most likely receive phishing emails in your inbox.
Phishing scams involve tricking people into giving away login credentials to sensitive accounts to steal funds, identities, or other personal data.
Bitcoin phishing scams usually entail receiving an email that tells you that there’s a security breach at a bitcoin exchange where you have an account and that you need to immediately log on to change your password to secure your account. However, instead of sending you to the exchange’s real website, the email will contain a link to a phishing website that is an almost exact replica of the real exchange’s website. Once you input your login credentials or private keys to your wallet, the scammers will use it to steal your bitcoin.
To avoid falling victim to a bitcoin phishing scam, never click on links in an email or social media message to access bitcoin services. Instead, always go to the official website or application.
Moreover, don’t ever give away your recovery phrase or wallet backup file.
Fake Bitcoin Apps
Unfortunately, there are fake bitcoin apps designed to steal funds of users who download the app to store bitcoin make it into app stores on occasion.
To avoid becoming a victim of a fake wallet or fake exchange app scam, make sure you always download mobile applications from official sources, like the company website.
That way, you can rest assured that you will not inadvertently download a bitcoin-stealing app.
Social Media Scams
Cybercriminals are increasingly using social media to target bitcoin holders to steal their funds. Unfortunately, social media scams come in different forms and aren’t always obvious to first-time bitcoin buyers.
A common scam you see on Twitter or YouTube, for example, is an impersonator account claiming that they will double your bitcoin if you send BTC to a specific address. Of course, you never see that money again and you also don’t get to double your bitcoin.
Alternatively, some scammers claim to be raising funds for a specific cause by posting a bitcoin wallet address. However, instead of donating to a cause, the bitcoin end up in the scammer’s hands.
Cybercrime is a booming business and bitcoin is a popular target for hackers because of the irreversibly and relative privacy of bitcoin transactions. As a result, bitcoin-stealing malware has emerged to target the bitcoin holdings of unwitting investors.
While there is a suite of bitcoin malware, arguably the most malicious software is that one that scans your laptop for your wallet’s private keys or backup file. Once the malware has found it, it sends it to the hacker who then uses it to steal your bitcoin.
To avoid accidentally downloading bitcoin malware, purchase high-quality antivirus software and a malware detection program. Moreover, don’t download any files sent from unknown senders.
Bitcoin Cloud Mining Scams
After the bitcoin mining difficulty increased to a level where at-home mining became unprofitable for most people, so-called cloud mining operations emerged.
Bitcoin cloud mining involves buying a mining contract from a cloud mining provider to deploy a specific amount of hash rate at their facilities on your behalf. The cloud mining contract buyer receives mining rewards in relation to the hashrate they purchased while the cloud mining provider that runs the machines charges a fee for their service.
On paper, bitcoin cloud mining doesn’t sound like a bad idea. However, mining contracts typically state that if the price of bitcoin drops below a certain threshold that makes mining unprofitable, the machines will be switched off and the contract ceases to be valid. Moreover, cloud mining providers charge fees that eat into users’ mining profits, resulting in many unprofitable cloud mining contracts.
While cloud mining itself has received a bad reputation for the lack of profitability and the high risk it entails, most so-called cloud mining operations have actually been scams, run as Ponzi schemes.
Instead of actually mining bitcoin, they encourage their victims to onboard more users to receive high referral fees, which are then used to pay existing users their non-existing “mining rewards.” Once the operators have made enough money, they just shut down the operation, typically by claiming they have been hacked. At this point, getting your money back is next to impossible.
The best way to avoid cloud mining scams is to avoid cloud mining altogether. While there are a handful of legitimate cloud mining companies, you are probably better off mining at home or simply buying and HOLDing bitcoin.
High yield investment programs (HYIP) are fraudulent investment schemes that claim to deliver high daily returns. However, they are just Ponzi schemes paying existing users’ “returns” with money brought in from new users who “invest.” Eventually, the scammers just disappear with all the funds held in the scheme.
Bitcoin HYIPs operate on the same model except that bitcoin is the transactional currency used.
To avoid falling victim to a HYIP scam, never invest your bitcoin in any platform that claims to deliver exceptionally high returns that sound too good to be true.
Unsolicited “Customer Support”
Finally, you may also come across fake customer support scams, especially if you are active on social media. In this bitcoin scam, scammers set up a fake customer support account on social media or messaging apps like Telegram to reach out to individuals claiming there is an issue with their account. To help fix it, they claim that they need your exchange login details or wallet recovery phrase.
At this point, you know that you should never provide your bitcoin services login credentials or your wallet’s recovery phrase to anyone. If someone from the support of a Bitcoin app you are using contacts you outside of official channels, you are probably talking to a scammer. So stick to official channels for any support queries.