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Cryptocurrency Scams Are Everywhere: Here’s How To Spot & Avoid Them In 2024

How To Protect Your Money
Last Updated:

In this guide to avoiding cryptocurrency scams, we describe some common scams and provide a checklist so traders can feel safer when trading Bitcoin and other cryptocurrencies.

Jump to our list of legit cryptocurrency brokers in .

Common Cryptocurrency Scams

It’s easy to think that everyone is getting rich trading in cryptocurrencies. Many scammers take advantage of trader greed with dubious products and services.

Here are the most common scams.

Initial Coin Offerings (ICOs)

ICOs are fundraising mechanisms for newly launched cryptocurrencies. Traders in ICOs receive tokens in the new venture.

Many ICOs have launched with problems:

  • Although many ICOs are legitimate, the vast majority have no real business plans or technology behind them.
  • Some ICOs launch with little more than a whitepaper written by people with no technology or industry experience.
  • New altcoins often make unsubstantiated claims about their products.

ICO Fraud

Governments, regulating agencies, and law enforcement have started cracking down on ICO fraud:

  • The US Securities and Exchange Commission (SEC) has filed fraud charges against ICOs that were sold based on fraudulent claims.
  • China has banned the sale of ICOs.
  • Many individuals familiar with fraud, including the famed “Wolf of Wall Street,” Jordan Belfort, have described ICOs as the biggest scam ever.

Unregulated Brokers & Exchanges

There are dozens, if not hundreds, of unregulated online exchanges and brokerage firms offering cryptocurrencies and cryptocurrency trading products.

Traders should be wary of too-good-to-be-true promotions and promises of quick riches. Once you deposit money, many of these firms will charge you outrageous commissions or make it very difficult to withdraw funds. Some of the worst offenders will simply steal your money.

Bitcoin Trading Systems

Bitcoin’s extraordinary volatility has spawned an industry of automated trading systems. The promoters of these products promise traders a way to beat the market by arbitraging prices between different exchanges.

Bitcoin exchanges often have expensive withdrawal processes and impose hefty fees for converting bitcoin into fiat currencies like dollars or euros. Also, the settlement of bitcoin trades can take hours.

These factors can eliminate any profits from bitcoin arbitrage and may even lead to losses.

How to Safely Trade Cryptocurrencies

Cryptocurrency trading is risky and highly speculative, so there is no low-risk way of trading.

However, traders can mitigate some risks by following a few simple rules.

Important: This is not investment advice. We present a number of common arguments for and against investing in this commodity. Please seek professional advice before making investment decisions.

Trade Only What You Can Afford To Lose

Cryptocurrencies are far more volatile than stocks and bonds, and the industry evolves rapidly. An altcoin that is popular today may not exist a month or a year from now.

In other words, traders should consider the real possibility that they may lose all of their deposits.

Research Carefully

Traders should read reviews about brokers and exchanges before opening accounts. The cryptocurrency industry makes news every day with new products and exchanges, so finding reliable, current information is vital.

Forums such as CryptoCompare and BitcoinTalk can be a source of information and advice.

Choose an Appropriate Trading Instrument

Traders may choose to go with buying cryptocurrency via a broker or an exchange, but there are other ways to speculate on crypto prices, too.

Cryptocurrency CFDs

Some traders who want to speculate on the price of a cryptocurrency may consider trading Contracts for Difference (CFDs). A CFD is a financial instrument that allows traders to speculate on price movements rather than owning the cryptocurrency itself.

CFDs are a regulated financial product which means the brokers who offer them should be licensed by a regulatory authority.

How CFDs Work

The value of a CFD is the difference between the price of a cryptocurrency at the time of purchase and the current price. In other words, the value of a CFD increases as the price of the cryptocurrency increases but falls if the price declines.

Choose a Regulated CFD Broker

There are, of course, criminal CFD brokers operating outside the law so you should do your homework before depositing!

The brokers we review are all regulated by reputable financial regulatory bodies, offering varying degrees of protection for your money – from ensuring it is held in a segregated bank account to participation in compensation schemes should the broker become insolvent.

A regulated CFD broker will provide clear guidance on any applicable trading fees which isn’t always the case when working with an unregulated cryptocurrency exchange or broker.

CFD Risk Management Tools

Many reputable CFD brokers have risk management tools that enable you to limit the amount you can potentially lose. For example, you can set a stop loss so that if a market moves against you, your losses are limited to a set amount.

IMPORTANT: CFDs are not available in the USA due to local regulation, and regulated brokers do not accept US citizens or US residents as clients.

Free Checklist for Evaluating Trading Opportunities

Here’s a handy tool you can use to ensure the crypto service you’re using isn’t a scam.

Regulated Brokers: Where Can I Trade Cryptocurrency?

Start your research with reviews of these regulated crypto brokers available in .

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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74%-89% of retail investor accounts lose money when trading CFDs. You should consider whether you can afford to take the high risk of losing your money.

Further Reading

Plus500 is not available in the US

Legitimate CFD brokers, like Plus500, cannot accept US clients by law

US traders welcome at these brokers:


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