Is Cryptocurrency Safe?

Cryptocurrency scam

Unfortunately, there has been an increase in the number of crimes related to cryptocurrency. Cryptocurrency-related fraud can take one of the following forms.

Fake websites. Scam sites with fake reviews and crypto jargon that promise huge guaranteed returns if you keep investing.

Virtual financial pyramids. Cryptocurrency scammers advertise non-existent opportunities for investing in digital currencies, creating the illusion of huge profits, while paying off earlier investors with new investors’ money. The BitClub Network scam raised over $700 million before its members were charged in December 2019.

Cryptocurrency support by pseudo-billionaires. Posing on the Internet as billionaires and famous personalities, scammers promise to increase investments in virtual currency, but in reality they appropriate the funds sent by users. Fraudsters can also use messaging apps or chat rooms to spread the word that a well-known businessman supports a particular cryptocurrency. As a result, investors start buying cryptocurrency, the price rises, and then the scammers sell their share, and the price of the currency falls.

Fraud in online dating. The FBI is reporting an emerging trend of online dating scams, where users of dating apps or social media are persuaded to start investing or trading virtual currencies. In the first seven months of 2021, the FBI Internet Fraud Complaint Center received more than 1,800 reports of online dating scams related to cryptocurrency; while losses reached $133 million.

Fraudsters can also impersonate real virtual currency traders or set up fake exchanges to trick users into giving them money. Another type of cryptocurrency scam is fraudulent offers to sell individual retirement accounts in cryptocurrencies. Then there is a hacking of cryptocurrency wallets and theft of virtual currency.

Cryptocurrency security

Cryptocurrencies are usually based on the use of blockchain technology, which describes the way transactions are recorded in blocks with time stamps. This is a rather complex technical process, which results in a digital ledger of cryptocurrency transactions that is sufficiently resistant to hacking.

In addition, two-factor authentication is required to complete transactions. For example, a username and password may be required to start a transaction. You may then have to enter an authentication code sent as a text message to your mobile phone.

However, all these security measures do not exclude the possibility of cryptocurrencies being hacked. Several major hacks have cost crypto startups dearly. The two biggest cryptocurrency hacks in 2018 are the $534 million Coincheck crypto wallet hack and the $195 million BitGrail crypto exchange hack.

Unlike government-backed money, the value of virtual currencies is entirely determined by supply and demand. This can cause sharp fluctuations that can bring investors both significant profits and significant losses. In addition, investments in cryptocurrencies are much less subject to regulatory protection than traditional financial products such as stocks, bonds, and mutual funds.