So without further ado, let’s walk through some of the most common red flags below.
Be Careful About Reputation
You’ve heard about a great new currency you like the sound of, and it’s doing well on the market right now. You want to get involved and invest, and that’s great too.
But before you do, double check where this currency has come from.
What information is publicly available about the creator(s)? Look for white papers, read up on forums, and look for past projects they may have gone into.
The latter is incredibly important, as you need to know what (if any) projects these creators have worked on before, as well as what ended up happening to them.
Don’t Take Anyone at Their Word
If a friend told you about a cryptocurrency they’d invested in, and they were pleased with the way it was performing, would you immediately invest in it too?
There’s a chance, because you know this person and you trust them.
But never take anyone at their word. You first need to know for yourself what ‘performing well’ really means.
Avoid Anyone Trying to Rush You
This is a classic scam technique. The person trying to get your details and/or money makes you feel like there’s a time limit on making a decision.
That sense of urgency is going to be what trips you up more than anything else.
Of course, in the world of crypto, a scammer is unlikely to tell you that you’ll be going to prison unless you invest in their new currency.
Instead, they’re going to play on hype in the form of ‘FOMO’, as no one wants to miss out on a great investment while the market looks strong.
Hype can be dangerous
Buy into the hype and you might end up putting all of your investment fund into a currency, only for the same person who encouraged you to invest to turn around and ‘pump and dump’ it.
This result is quite common across social media, with various content creators and influencers hyping up certain currencies to their audience.
Even if they don’t intend to run a pump and dump scheme, they still end up being one of the few people who actually made a return.
Once again, never just take a public figure at their word. Conduct your own checks and make your own decisions.
Staying Safe with Crypto: Top Tips
Now you know some common red flags, how do you actually avoid falling prey to them?
For one, always approach the crypto market with a healthy sense of skepticism. If you want to be an experienced trader one day, you need to take your time with the market.
But there’s a couple of other things you should do to stay safe as well:
Find out as much as you can about chains
No crypto investor should be just be slinging their coins around without any care. The market for crypto isn’t regulated in the same way usual financial markets are – and that’s one of the main appeals of investing in crypto.
You can make money, you can move money, and you can keep your crypto investments in whatever place is best for you. All you need is access to trading platforms and your own wallet.
But even with this freedom to grow your investment, you need to be careful about this decentralized aspect. If you’re using a non-centralized platform to trade, that’s one thing. But with new currencies and chains being launched at break-neck speed, you always need to be in the loop.
Use a clever bit of automation to help yourself out here. Sign up to block explorer software that lets you investigate blockchain in the same way you’d tap something into Google to find out more.
You can even launch custom a block explorer to uncover and track the specific targets you’re interested in, and you don’t even need to be a tech expert to get it up and running.
Keep your accounts secure by following best safety practices
We all know the standard online safety rules, right? If you don’t, we’re here to serve you a quick reminder.
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Make a strong password and never share it with anyone, no matter how close they are to you.
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Try not to share private details with strangers. You’ll be making traders across platforms, both public and private, but you should be protected by that platform’s encryption system.
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Turn on 2 factor authentication, if you can. If someone needs both your actual password and a code sent to your phone or email, they’re not going to get into your account.
Crypto Trading: Take Note of a Red Flag When You See One
There’s quite a few to be on the lookout for, and that can be a worry. You don’t want to miss a single hint of red whenever you’re looking into a new chain or currency.
But all in all, you may just need to trust your gut here.
After all, we’ve all been taught the golden rules of keeping your money safe:
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Get rich quick schemes don’t exist
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Everyone is trying to sell you something
These rules are usually the basis of all our money decisions in adult life. Stick to them in the crypto world and you’re far less likely to fall for any red flags pretending to be green ones.
When you’re trading crypto from the comfort of your own home, don’t let the ease of this kind of investing lull you into a false sense of security.
Stay sharp, stay smart, and stay safe.
This is a contributed post.