There are many crypto trading brokers in the market, some legit, and some who are not. Crypto trading scams have become common and are everywhere. So, it is up to you to vet which broker is legit and a scammer.
Cryptocurrencies are virtual currencies that live online and are not backed by the central bank or government body. As with any other financial “giant,” cryptocurrency is highly volatile and offers incredible interest to willing risk-takers. Various forms of cryptocurrency have given rise to millionaires over the years, causing tremendous growth in value.
The value growth has led to more and more people wanting to try their luck in the cryptocurrency market. However, some criminal elements and bad market players are looking to defraud willing investors. As such, so many potential investors are now shying away from investing in this fast-growing and fascinating industry.
Who is a Crypto trading broker?
A cryptocurrency broker is an individual or a firm that serves as an intermediary between a willing investor and the cryptocurrency market. These brokers make it easy for a customer to buy the various cryptocurrencies at their prices.
Seeking a cryptocurrency broker’s services is more of a necessity for a beginner in the cryptocurrency market. Crypto trading brokers offer a suitable environment for beginners looking to venture into Ethereum, Bitcoin, Litecoin, or any other cryptocurrency form.
How to tell if a Cryptocurrency Broker is a Scam
- They promise excessive gain on an investment
- You will be asked to invite more users
- They ask for your passwords
- It has previously had issues with scamming investors
- The firm has no public information on Google or social media sites
Common Cryptocurrency scams
There are hundreds, if not thousands, of unregulated online brokers claiming to be certified to deal with cryptocurrency trading. Do not be fooled by the fancy offices and the serious outfits these brokers posts on their sites or profiles to convince you to invest your money.
As a trader, you need to be wary of any promises that are too good to be real. Chances are, once you deposit money, most of these brokers will charge you a high commission. Alternatively, they can put in measures that make it almost impossible to access your funds.
You can now be a legit broker by asking for their certification and doing your research online. Please find out how long they have been in business and go through their customer reviews section. A firm without a license or an online presence is suspicious. Also, check for how long the site has been up, avoid recent websites without a community base.
Appealing impossible promises on returns
While cryptocurrency can bring huge profits, some fast-talking swindlers will satisfy the investor’s greed to get more money. A fraudster will come to you with promises of a significant return on your investment without adequate information on the investment strategy.
Once you fall prey to the numerous WhatsApp and Telegram groups created by the scammers, you will eventually decide to invest and wait for around four months to get a significant return.
During this time, you, as the investor, will be so excited and will share your big moment with friends and family as you convince them to join. Without a sound investment plan, you are probably being scammed. Also, beware of surprisingly high returns promises; most are untrue.
Fraudulent ICO- Initial Coin Offerings
A common scamming technique is a fake initial coin offering. ICO is the first step a company takes when looking to raise money from the public. Customers are promised a good discount if they send active cryptocurrencies.
Sadly, most ICOs are scams, and the fraudsters go to the extreme of even leasing an office and creating marketing material. Beginners in the market have fallen prey to this scam.
Always ensure the ICO has a legitimate business or technology behind them. Firms launch most ICOs with only a whitepaper written by people with little or no experience.
To test the legitimacy of an ICO, always check the company’s reputation. Also, check whether the people associated with the project have their full names on paper.
How You Can Safely Trade Cryptocurrencies
As rewarding as crypto trading may be, it is quite risky. Luckily, there are some tips you can use to mitigate these risks. Having discussed the main ways through which traders get scammed, here are some tips on how to trade safely;
Only invest an amount you are willing to lose
An investment is not 100% guaranteed. There is a risk of success and failure. Besides, cryptocurrencies are more volatile compared to bonds and stocks.
Therefore, a currency that is popular and high-valued today may not exist some years from now. Therefore, as an investor, you should consider the possibility of losing your deposit. Thus, only invest what you can lose.
Carefully choose an appropriate trading instrument.
As a trader, you can choose various methods to buy your cryptocurrency. It can be through a broker or an exchange program. Always choosing your trading instrument carefully.
Do your research
Before opening an account with a broker, you should always do your research. Since the market is volatile, the industry makes news daily with various exchanges and new products. Thus, you need to find current and vital information to trade on.
Choose a licensed and certified CFD broker.
Some traders find it necessary to speculate on the cryptocurrency they want to trade-in. Thus, they may use Contracts for Difference (CFD), a financial instrument that enables investors to speculate the currency.
Therefore, these instruments are regulated, and brokers offering them need to be licensed by the relevant regulatory authority such as CySEC. A regulated CFD broker provides clear guidance on any trading fee, a service you won’t get from an unregulated broker.
Despite the numerous fraudulent activities in the cryptocurrency market, there are respectable, well-managed crypto trading brokers. Our guide has made you smarter about scammers, and you can now tell between a legitimate and fraudulent broker. Other than the famous honest brokers you might have heard or transacted with, you can also check more here.