New crypto projects are released almost daily. However, many of those projects are scams. It is important to conduct your own research, no matter how lucrative a project looks, before you invest in it. Some of the most common scams are Ponzi schemes. In this scheme, an online site may claim that it will invest your crypto holdings for unreasonably high returns while talking only a small percentage of the profits. Visionary Financial most recently outlined the growth in issued cryptocurrencies since 2015. The growth is the very reason you should be asking numerous questions before investing in the next “project”.
It can be difficult to differentiate between genuine and fake projects. Sometimes, fake projects will even try to disguise themselves as the real deal. You should not trust links shared by your friends on social media. It is important to note that some of them might be taking part in a referral program, where they get a small fee for anyone that signs up. They could also be actively participating in a pyramid scheme. Here are some of the things you should investigate before investing in a project:
1. Who is in charge of the private key?
If you will not be in charge of the private key, you need to understand that the company has full control of your invested capital. This is why everyone is told to never hand out their Bitcoin private key to anybody but yourself. Doing so is quite risky…
2. What is the minimum amount you can invest in?
If you cannot invest a low minimum of $1 and you have to invest at least $100, be careful about investing in the project.
3. Why are you recommending the project?
If the person does not come clean about the reason why they recommended the project to you, they may be trying to trick you into joining a pyramid scheme. And no… having a great referral program should always be null and void.
4. What is your experience with the project thus far?
If someone cannot demonstrate the benefits that he or she has received from the project, there is no reason why you should engage in it.
5. What is the feedback from other customers?
Finding feedback from other customers about their experience is one of the best ways to gauge if a project is genuine. This feedback can be easily found on online platforms. If you go to the companies Telegram channel and see a bunch of “bot” activity, it’s time to step away.
6. Ask about the fees
Before taking part in a project, always understand if there are any fees.
7. What is the amount you can expect to make?
If the amount proposed seems too high, it is probably a scam.
8. What is the core business?
If the project makes money by asking you to recruit others, this is a clear sign that it is a Ponzi scheme.
9. How long does it take to opt-out?
If the fees required to opt-out of a project are high or if the time it takes to opt is long, this might be a Ponzi scheme.
10. Ask about the contact information and address.
Most fake projects will have a fake address and the contact details do not always work.
11. Is the business properly registered?
Fake projects will be registered in a shady jurisdiction or they will have fake business registration information.
12. How are loses managed?
While most fake projects will talk about amazing profits, they will not have any proper answers on what happens when the investments go bad.
In general, do not invest in a project that you do not understand. It is also important that you only invest what you can afford to lose. Finally, there is no guaranteed return in the investment world. If a project makes a guarantee on returns, it is most likely a scam.
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