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How to avoid crypto scams: Tips from an expert

·2-min read
Man at computer watching trading position with Bitcoin symbol on the side.
Expert reveales how to avoid getting caught up in a crypto scam (Source: Getty)

The cryptocurrency world has been booming recently – and with it, so have the scams.

Many Aussies have fallen victim to false promises of high returns and even fake news articles promoting cryptocurrency and crypto assets.

Just in the month of March, three in four investment scams reported to the Australian Securities and Investments Commission (ASIC) related to cryptocurrency scams, a spokesperson previously told Yahoo Finance.

Crypto Head co-founder Adam Morris said Aussies need to keep a look out for these warning signs.

‘Too-good-to-be-true’ returns

People should always be wary of platforms offering huge returns, Morris said.

“If it sounds too good to be true, it most likely is. Never send your money or cryptocurrency to a platform you don't completely trust,” he said.

“If you do some quick research you should be able to gauge online how reputable a company is.”

Name dropping

If you see your favourite celebrity or TV personality promoting a cryptocurrency asset, you might want to think twice before putting your money in the product.

“Even if you see big names like Elon Musk supposedly endorsing the investment, do not take this at face value,” Morris said.

“Scammers are so successful because they use recognisable and trusted names to dupe people into believing it’s a sound investment when really these names have no association to it at all.”

  • Watch: Is Bitcoin bad for the environment?

How do I invest safely?

Morris said there are three steps to consider when choosing to invest in cryptocurrency if you want to do it safely.

Define your goals

If you’re looking to try and make large returns quickly you’re going to want to go a different direction than if you want something safer to hold on to.

If you’re interested in taking on a lot of risk with the hope of large returns, then Morris suggests alt coins might be the way to go.

On the flip side, if your aim is to garner some long-term wealth growth, then Morris said it might be worth looking into cryptocurrencies that have been around longer and have shown they can withstand the test of time.

Work out how much time you have

Morris said it’s important to understand how much time you are able to, and are willing to, put into keeping up with your investment.

If you are investing in alt coins there will be more work than holding money in the more defined cryptocurrencies.

Trade safely

Morris said it's important to use an exchange you trust that also doesn’t charge high fees.

“Make sure that you store your cryptocurrencies in an offline-wallet such as a hardware wallet,” Morris said.

"'Not your keys, not your crypto’ – if you don't have custody of your cryptocurrency in your own wallet you are at risk.”

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