Each month, a huge variety of cryptocurrencies are launched, and with these new crypto assets, initial coin offerings (ICOs) are also launched. With all these discoveries and inventions. The appetite for more and more cryptocurrencies has increased among investors even though there was a huge issue with cryptocurrencies in 2018. If you want to learn more about bitcoin trading, go here. But all these technologies bring around the risks of scams and fraud.
Scammers never miss a chance to play with their money, and the considerable elevation in the growth of the cryptocurrency industry has provided them with plenty of opportunities for scams. According to a report by Chainalysis, a massive scam of 14 billion dollars of crypto happened.
If you are considering investing in cryptocurrencies, you should know the investment scams and crypto legitimacy issues.
Cryptocurrency Legitimacy Issues
There are various types of cryptocurrency scams that can create crypto legitimacy issues among people.
Fake Websites for Cryptocurrencies
Scammers always come up with new ideas for fraud. The scammers can make fake cryptocurrency trading platforms or fake versions of crypto wallets to fool unsuspicious victims.
These fake web pages usually have almost similar domain names as the sites they copy. These look pretty close to legitimate websites, making it super difficult to spot the difference between them. Fake crypto websites or exchange platforms play the most crucial role in misguiding people, and to stay aware of them, use authentic platforms like Bitcoin Trading Software, Gemini, Coinbase, etc.
How to Identify Legit Cryptocurrencies
Not all blockchain projects are the same, and crypto investors must know how to spot the good from the bad with this checklist. Below is a checklist to help you decide if a crypto coin is worth investing in or if it is a scam.
Check If the Code Is Verified
Verification of code holds significant importance in the legitimacy of cryptocurrencies. If the code is not correctly verified or authenticated, you probably get into a scam. The reason behind the scammer’s hiding code is it has bugs and problems that can cause harm.
Check Comments and Reviews of the Exchange or Website You are making a Purchase From
If people are calling it a scam, there is 99% certainty that it is. Most importantly, if you are a victim of this fraud, you must leave a review to be aware.
Again, check comments and reviews of the page or exchange platform you are purchasing to know what people have recommended and are experienced.
Check Coin’s Address in Google Search
If you search for the address on the internet and cannot find a proper homepage or website, it is likely to be spam.
Check Blocklists
Before investing in any token from random exchanges and websites, search the blocklist to have a better idea about it. If you find the token address in the blocklist, it is probably a scam.
Review Token Insights in The token Explorer
If you cannot find the token details on token explorers, the coin or token is probably a scam. Moreover, if you see them on the token explorer and observe a warning sign or notification, it is better to be cautious. If the token is authentic, you will see all details on token explorers.
Check the Number of Host Exchanges
If you notice that the token is only traded or is available on a few decentralized exchanges (DEX), it is better not to invest in it as it is probably a fraud.
Review Liquidity in Token’s Balance Pool
Checking a token’s liquidity on a platform such as Uniswap V2 or any authentic decentralized exchange is pretty simple.
In simple words, liquidity is the number of cryptocurrencies or coins stored in smart contracts to allow people to purchase or sell assets over decentralized exchange platforms.
Furthermore, if you find liquidity less than $100,000 or it is facing a decline at a special rate, you are probably about to get trapped in a scam. If you are using a decentralized exchange (DEX), you must check the primary on-chain activity of crypto assets.
Final Thoughts
The cryptocurrency euphoria is making it super challenging to keep a check on the legitimacy of crypto tokens, and people who invest often end up being trapped in scams. To stay away from such fraud, make sure to check all of the points mentioned above before investing.