Erica Stanford writes an exclusive piece for Female First
Erica Stanford writes an exclusive piece for Female First

People want to know every day how to get into crypto, where to invest, what to buy, what is safe, what isn’t etc. Unfortunately, there’s no clear answer and the risk in crypto is that any recommendations – whilst made in good faith and accurate at the time of making – might quickly change. A good exchange might get hacked, a founder may steal investor’s money and then exit, or regulations might kick in which mean that users suddenly have to withdraw their money, or accounts get frozen. All of these scenarios have happened and it’s not looking like it will be smooth sailing going forward.

What to do before investing in crypto:

1. Do your research

The first thing needed for anyone looking at crypto is to do a lot of research. If looking to buy crypto, an exchange that is listed publicly, is open abouts its employees and where one can Google the custody solutions used, will be a safer bet than one that seems to be run by an individual promising good rates but providing no firm evidence (check, don’t trust) of institutional grade custody, insurance or safety protocols.

2. Choose which cryptocurrency to buy carefully

When it comes to crypto, Bitcoin is demonstrably not a scam. Markets might be manipulated, but Bitcoin has proven itself time and time again to bounce back. This is not true for many of thousands of other cryptocurrencies. In the early days of crypto anyone could create a whole new cryptocurrency for very little effort or money. Project after project launched in a new crypto fundraising method known as an initial coin offering (ICO), giving themselves names ranging from Jesus Coin to Sexcoin to PotCoin to TrumpCoin to Catcoin and literally everything in between.

3. Be aware of the risks

Over 98% of these projects were either scams or failed – for all sorts of reasons, ranging from founders being utterly incompetent, to them spending their investors’ money on things that, whilst glamourous, were unquestionably unrelated to the project (villas, supercars, yachts, prostitutes etc), to founders running off with the money, to just bad luck, changes in regulation, banking woes and more. There are many incredible crypto projects out there but, needless to say, these are diamonds and one has to always do extensive research before investing.

How to avoid being scammed:

Unfortunately, this is not the easiest question to answer! Scammers are getting increasingly sophisticated, often moving from scam to scam and taking all of their accumulated experience, software, and contacts with them. Scams are ever more invasive and persuasive and thus can be very easy to fall for. A few warning tips and warning signs:

1. There's no going back

With Bitcoin, and crypto, once you send your transaction, that transaction is sent. There’s no asking for a refund or calling your bank and saying you were hacked and getting your money back. Once you send your Bitcoin, or other cryptocurrency, to a scammer, they can do what they want with it. The likelihood of them sending it back, whilst this has bizarrely happened, is slim. In short, scammers are trying to find any way to get you to send them your Bitcoin, or crypto and will do whatever it takes to trick you into sending your crypto.

2. Be wary of any site asking for your Bitcoin

If a site asks you to send over your Bitcoin, unless you know exactly what the site is (to do this confirm every single character in the domain and make sure to enter the correct spelling fresh into Google, do not click on any links), then go on the assumption you won’t see that Bitcoin again. Scams will play people to try and entice them to send over their Bitcoin.

3. Many scams have huge advertising budgets

Crucially, many scams have enormous advertising budgets and no restrictions on what they will do to promote themselves. Adverts, social media, and paying influencers are all common. Many scams will either trick celebrities or influencers into promoting them, or will imitate their sites, addresses or social media pages and handles so well it can be hard to tell the difference between real and fake. If a celebrity – or influencer – asks you to send them your Bitcoin, or crypto, for any reason- whether that be a promise to send you back more, or a loan, or anything, don’t! It’s almost certainly a scam.

4. Even if someone you know is asking you to invest, it could be a scam

One of the most common tricks now in crypto scams is using multi-level marketing where high commission payouts are offered to anyone who brings in a new investor. Ponzi schemes work by paying out to early investors, so those who get in early get their money back, with profit, and genuinely think the offer is good. Victims then share the scam with their friends and families, communities and congregations, of course tempted by the high commission rewards they’ll receive but also often genuinely believing that the scam is a good project that will make them all money. Unfortunately, if anyone, even if someone you know, is trying to get you to invest in a project, it could still be a scam. In general, for any crypto related project that uses multi-level marketing or pays commissions to get other people to invest, at the very least assume it’s a scam until proven innocent.

5. If it sounds too good to be true, it is

If any claim sounds too good to be true, treat it as such. It isn’t possible or sustainable to guarantee or promise returns of 1% a day or hundreds of percent a year or whatever claims are made. Yes it might be tempting, but in all likelihood you’ll lose your money by sending your crypto.

6. Watch out for these tell-tale promises

Some promises used by scams to part people from their crypto:

  • We have a Bitcoin mining set up- send us your Bitcoin, we’ll invest in the mining equipment and do all the hard work for you.
  • We have a trading algorithm. Send us your bitcoin, we’ll trade for you.
  • We have a new cryptocurrency, send us your crypto and we’ll give you new tokens. (Not always a scam, but...)

The above have all been used in crypto Ponzi schemes. Not to say that all such claims are scams, but needless to say, in these cases the mining equipment, algorithm or new cryptocurrency didn’t exist.

7. Do their claims check out?

Lastly, if a project claims to be partnered with X company, regulated by X country/authority, listed/soon going to be listed on X stock exchange, have X companies as customers, will issue an X type of debit card, or have X on their team/board – cleck all of these claims religiously. If even one claim is found to be false, treat this as an immediate red flag and steer clear. Scams will make up all sorts of claims and generally the companies or individuals named won’t even be aware their names or logos are being wrongly used by these scams.

Crypto Wars: Faked Deaths, Missing Billions and Industry Disruption by Erica Stanford is published by Kogan Page, priced £14.99, available online and from all good bookshop.

MORE FROM BOOKS: Seven things I'd like my readers to know about me, by Sharon Dempsey