How to Protect Yourself Before CryptoSecurities Trading

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CryptoSecurities, Not CryptoCurrency

Plain and simple, this is a more accurate term for what is de facto happening. When Bitcoin and the blockchain came about initially, those early adopters had a very different vision in mind for the potential of this technology than what is happening today. The crypto space has been quickly and swiftly taken over by those who have no interest in the long-term utility of a decentralized currency. Instead, the space now is overflowing with expert investors, piggybacking on the latest craze to continue their shady practices. To these unregulated traders, Bitcoin is first and foremost a security, not a currency.

The sharp rise in the price of Bitcoin in late 2017 can be explained away by this phenomenon quite easily. The effect of mass boiler room operations all pushing bitcoin aggressively helped to push the price up and therefore spoke truth to the shady investor’s sales script. This cyclical cause and effect (aggressively sell bitcoin as an investment, more demand than supply pushes the price up and therefore backs up your previous claim that bitcoin is a good investment) created a quick bubble and sharp pop all in the space of 6 weeks at the end of 2017.  

Along with this bitcoin bubble, derivative scams, currencies, and securities were created, many with Ponzi-like corporate structures where earlier investors can reap the rewards and commissions of the people they bring to invest. And so, the whole thing repeats. On a basic level, there is really only two possible outcomes to this type of corporate structure: either it will succeed and become the worlds number one investment tool/currency or, it will fail completely. The second of these options is where everyone except early investors who got out in time are left holding the bucket full of a worthless “currency.” This is the horror story of Bitconnect. It is not that someone stole everyone’s Bitconnect coins, it is that the value of those coins became worthless overnight.

The Horror Stories

BitConnect is one of the most well known of the bitcoin Ponzi schemes and rightly so. In total the BitConnect scheme swindled investors out of around $1.5Bn in one swoop. The potential for fraud on an industrious scale can be quickly realized in this digital landscape where the majority of those defrauded have little to no knowledge of what they are actually investing in. “In the land of the blind, the one-eyed man is King.”

Indeed, it has got to such a level of pervasiveness that Securities and Exchange Commission felt it necessary to release their very own fake ICO as a way to inform and educate people to how easy it is to do a BitConnect. The fake ICO is called the HoweyCoins and follows all the steps of a scam initial coin offering with flashy website, impressive payout structure for early investors, celebrity endorsements and of course white paper (only this white paper takes you to sec.gov showing you what to look out for to not be fooled by one of the many scam ICOs out there).

Binary Options 2.0 – With Cash!

The fall of binary options coincided with the rise of bitcoin and other cryptos. While we may never fully know what the key cause behind the rise of bitcoin was in late 2017, it is undeniable that the binary options scam industry pivoted its boiler room operations on a mass scale to be pushing cryptosecurites at the same time. The question is, how effective could these boiler room salesmen really be? Unfortunately, we know how effective these guys can be by what they did with binary options industry in the space of 5 years. And remember, binary options were a relatively unknown entity that quickly turned into a multibillion dollar a year industry. Companies like Wealth Recovery International have seen a spike in consumer claims for online trading fraud. What used to be Binary Options victims is steadily getting replaced with people who have been defrauded on cryptotrading platforms.

It’s almost as if the criminals behind the binary options fraud created the crypto hysteria as the ideal tool to perpetuate their scam. Many of the scam operators require you to first convert your fiat currency (USD, GBP, EUR, etc.) into a cryptocurrency and then deposit said crypto. What this does in effect is create an additional layer of security…not for you, for the people who are stealing your money! It’s a scammers dream; there must be a change to this dynamic.

The biggest fear to any online merchant is chargebacks. This is when a customer calls up his credit card provider (Mastercard, Visa) and refutes the charge on his statement. The fear and use of chargebacks is the sole reason for credit card charges. The couple percent you pay per transaction is a cost that has been worked out based on the number of chargebacks the company has to deal with. It is not all doom and gloom out there; there are ways to protect yourself from rogue crypto traders and even one trading platform that is trying to revolutionize the entire industry by eliminating the broker and replacing them with the blockchain.

Protect Yourself from Rogue CryptoTraders

Unfortunately, the excitement surrounding these innovations are is so vast that the inevitable has happened; the rogue scammers have barged in through the front door (with a white paper of their very own) with promises of huge returns, low risk and…. the binary options boiler rooms have reincarnated in the form of crypto trading “experts”. Last year the guy with a fake name was an expert in the stock market, now they have pivoted their expertise to swallow up a whole new industry.  

The is no reputable independent agency that you can follow through to ensure that the website you are dealing with online is legitimate. However, there are many red flags that, if spotted, we advise to avoid at all costs. It cannot be underestimated the number of online scam artists that have been attracted to bitcoin and other crytpotrading platforms. The only crypto trading company we are aware of that is even trying to address this problem is something like spectre.ai; the world first broker-less financial trading platform. By putting the entire trading platform on the decentralized blockchain protocol, their aim is to eliminate even the possibility for broker fraud. This is certainly a step in the right direction.

The ways to protect yourself from cryptosecurity companies, websites and platforms is to be more careful with your investment than you would with an offline trading company. The flashy, slick and user-friendly websites are built for one reason; optimization of click-through rate. This is the only thing that it is important to the people behind the site. Once you have made your FTD (first-time deposit), the aesthetics and ease of use of the website become a secondary concern. In the place of a high click-through rate comes sales technique – back to basics of a boiler room pressure salesman. This is where those crooks who have spent the last few years flogging unregulated binary options to unwitting victims around the world are perfectly trained to sell you the next big thing. Unfortunately, this is where the combination of real media and black hat SEO techniques collided with such an effect that people like me are feeling it necessary to write articles trying to warn people not to get duped by the seemingly “fantastic opportunity” you have been presented with.

In conclusion, you should always be skeptical, especially when dealing with an online entity and even more so if said online entity is a trading platform. A simple rule is to never trust anyone online more than you would if you met them in the street. Follow this rule and the few tips given in this article, and you can be confident with trading cryptos. If the company/website has even one red flag, run in the opposite direction.

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About Author

Jeremy Biberdorf is the blogger behind modestmoney.com and long time SEO pro. In addition to his finance blog he also runs an ad agency at adinventory.org and a freelance writing marketplace at targetwriters.com