DYOR in Crypto: Spot Scams and Protect Your Investments

Since the inception of Bitcoin in 2008, the decentralized financial system has encountered drastic changes in terms of technology, regulation, and adoption. They have become a main part of the mainstream economic structure. The popularity has attracted a lot of scammers. Its decentralised nature is what makes it easier to penetrate this system.

According to reports from the FBI, Americans have lost $9.3 billion to crypto fraud in 2024. As most crypto transactions are carried out under pseudonyms, this allows for criminal use. This article is about the various types of crypto scams and how to do your research (DYOR) to avoid them.

Types of Cryptocurrency Scams

Many cryptocurrency scams are prevalent now, as scammers exploit people seeking ways to earn a quick buck. So, here are a few types of cryptocurrency scams that you should be aware of.

Crypto Investments

Yes! Investments are a time-worn scam technique that people still fall for. Scammers claiming to be investment managers get in touch with people who want to invest in cryptocurrencies. These so-called managers also claim to have achieved millions of dollars and promise investors that they can help them make higher returns. Before getting started, they will charge a huge sign-up fee.

These scam managers would also ask people for their personal information, claiming that they would need it to transfer the funds. They use this data to access individual crypto wallets. Various websites are also prevalent, offering “guaranteed higher returns”.

Phishing

Phishing is another popular scamming method. Scammers target traders’ crypto wallets. For this, they will send an email with links that lead to a website to extort their crypto wallet’s private keys. The scammers create websites that look very authentic or are replicas of authentic platforms. They will use the private keys to access their crypto wallets and steal their investments.

Rug Pull Scams

Rug pull scams are where scammers create a new project, NFT, or coin to raise funds. They establish trust by pitching the project to investors and running the project for some time. Once they get the money, they disappear with it.

One popular rug pull scam was the Squid coin scam, which was named after the popular Netflix series Squid Game. In this scam, investors had to play to earn cryptocurrency, and they had to buy tokens for the game, make more money, and exchange them for other cryptocurrencies. It is reported that scammers made 3 million dollars from this scam game.

Romance Scams

Dating apps have also become a central area for crypto scams. As we know, people from different parts of a country or the world meet online. One party gains the trust of the other. In time, they convince the other to invest in cryptocurrency or share their personal details, even wallet keys. The scammer will extort money and quickly disappear.

Cryptocurrency Giveaway Scams

Giveaways are common on every social media outlet. We can see that many cryptocurrency giveaway scams have become prevalent. Some of them also include fake pictures and promotions made by celebrities. By clicking the links, investors are taken to fraudulent websites. They would verify their bank accounts to receive Bitcoin. However, it could be a trick to make a transaction and transfer the funds.

AI Crypto Scams

Crypto scammers use AI to deceive investors by engaging with them about cryptocurrencies, giving advice, and issuing fake coins. Using AI-based chatbots, they lure investors with lucrative opportunities and provide manipulated evidence. Usually, we can see that such AI-based programs have many followers, giving a false impression of authenticity.

Recommended Reading: How To Spot A Crypto ICO Scam: Expert Tips For Crypto Investors

Why Should You Do Your Own Research While Entering Crypto Trading?

Research is the first keyword you should have in your mind before entering the crypto market. Almost 70% of crypto investors lose their money because they do not conduct proper research and blindly follow the herd. So, you should examine various areas and consider different factors before making a trade-related decision.

Benefits of DYOR in Trading

You should conduct your own research to make well-informed decisions. It also gives you the power to exercise good judgment. Here are some of the benefits of doing your own research when it comes to crypto trading.

Make the Best Decisions

You can make your own decisions by conducting research on your own. It reduces the dependence on secondary sources. You can also collect more accurate information that will help you make better decisions.

Reduce Risks

With thorough research, you can learn more about real potential opportunities and risks. You will be going through various sources of information and have the best understanding of how it works, and avoid falling into common pitfalls, scams, and investing in underperforming assets.

Enhanced Critical Thinking

With first-hand knowledge of every aspect of crypto trading and assets, you can evaluate all aspects of cryptocurrencies. You can easily determine which investments work for you. It can also help distinguish between a scam and a real opportunity.

Long-Term Planning

You can make long-term investment plans based on your research and expertise. Moreover, you will have a fundamental knowledge of market conditions. It will help you plan your investments accordingly and design a long-term strategy.

How to DYOR Before Undertaking a Crypto Project?

The first step before taking up a crypto investment opportunity is to ensure it is secure and reliable. You should sign up on regulated platforms for a safe trading experience. Here are a few things to consider for DYOR.

Oversee Fundamental and Technical Aspects

When it comes to fundamental analysis, you should examine the technologies used, including blockchain, innovations, and protocols followed. You should also look into the reputation of the team that developed the project and whether they have the skills.

Thirdly, you need to examine the aims and objectives of the project. You should also foresee whether the project is sustainable in the long run. Moreover, you should only form partnerships and collaborations with reputable teams.

If we talk about technical analysis, you have to consider the price data and look into market trends. You can also use tools like MACD, RSI, and moving averages. Check the trading volume to learn about the interest and liquidity of the cryptocurrency. Look out for any signs of manipulation or controlling ownership.

Pay Attention to the Red Flags

When conducting research for a crypto project, you have to look out for some red flags. Some of the signs to look for are:

• Promises of quick and higher returns.
• Lack of transparency about the team and technology
• Low-quality whitepaper and lacking significant details
• Intense promotions, aggressive marketing campaigns to create an urgency

Consider the Risks and Benefits

Before going for a crypto investment, you should consider the risks and benefits. You should research the project’s potential growth and risks. It is also important to learn about the opportunities it offers. You should look at the regulations and security measures implemented in this project.

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What to Do if You Fall into a Crypto Scam?

The crypto scams are so perfect that you will not know until you fall victim to them. So, given are some steps you should take if you get into one.

• Contact your bank if you have made a payment
• Do not send any more money
• Report the scam to the Federal Trade Commission (FTC)
• Change your username and passwords across the platforms
• Report any social media scams to the concerned customer support
• Seek recovery measures, such as legal assistance

Final Thoughts

The crypto industry offers so many opportunities, but it is also filled with scams, which makes it more difficult to carry out. So, it is best if you take your time and do all the research to ensure that you are making the right decision.

You should evaluate your own goals and the outcomes that you expect through this project. It is also important to make sure that you invest in things you understand and have a wide knowledge of. You should also choose the authentic platforms to carry out trades and look for any suspicious activities. Ensure that you don’t fall into online giveaways and phishing scams.