Bitcoin is risky to begin with. It is a digital currency that is not regulated by any central government or finance agency. It’s value is not backed by any hard currency or precious metal. The only value the cryptocurrency has is it’s relatively limited supply and merchants who are willing to accept it. If merchants decide to stop accepting Bitcoin or a central government decides to shut down exchanges, then you’ve lost all your value. While people like you are making a mad rush to buy Bitcoins, scammers are seizing the opportunity to rip you off. Assuming you still want to invest in the cryptocurrency or use it to make purchases, here’s how to avoid Scams:
Holding Bitcoins Online is Risky – Do not hold your Bitcoins in an online wallet without multi-factor authentication. This means that not only do you have to enter your password, you have to enter a code generated by your mobile phone. If you can access your account with just your password, then it can easily be hacked into. Unlike cash, Bitcoins are easy to steal. Once they leave your account, it is impossible to make a chargeback. Theaves can “tumble” the Bitcoins through many different accounts over and over again until they disappear. You are better off holding your digital currency on physical paper or in an offline hard drive.
Do Not Sell Bitcoins Without Cash Payment – If you offer to sell your Bitcoins with a credit card or with paypal, the buyers can scam you. All the buyers have to do is say they didn’t receive the digital currency and issue a chargeback on the card. Or they will claim that the transaction was fraudelent. Either way, the credit card company will remove the charge. Not only have you permanently lost your Bitcoin, you have lost your payment too. This is why most online exchanges do not allow you to purchase Bitcoins with a credit card. Make sure you have the cash in hand before transferring the Bitcoin. It is more secure to transfer the digital currency person than over the internet.
Check the Fair Market Rate Before Buying Bitcoins – With currency exchanges and high volume trading, Bitcoins have a fair market value, which changes every minute. Some sellers will offer you fractions of Bitcoins for what seem like cheap prices. In reality, if you do the math, you are paying 2 to 3 times what the Bitcoin is actually worth. If you want to get a fair market price for Bitcoins, compare prices from multiple exchanges to see where you can get the best price. If the company does not display their exchange rate, back off. They will probably rip you off.
Avoid Unreputable Exchanges – Make sure the exchange you buy from has a high reputation before you buy Bitcoins. Avoid shady websites. Exchanges engaging in illegal activity are subject to being shut down. When an exchange is shut down, it is possible that you could lose all your Bitcoins if you are holding them in online “wallets.”
Don’t Buy Mining Equipment – Bitcoin mining used to be something the average person could do with their laptop. But now with more competition and harder to solve puzzles, mining is only for the elite. Serious Bitcoin miners have rooms full of computers to maximize their computing power. If you have no idea what you’re getting into, do not buy Bitcoin mining equipment. You will get scammed.
Remember that Bitcoins themselves have no intrinsic value. Even if you are able to successfully buy and hold the digital currency, they could drop in value very quickly. If worldwide governments decide to ban them, then they will have no value as a currency. Much of their value is based on speculation. Invest wisely.