How to Work and Get to Know Bitcoin Ponzi Schemes

Ponzi schemes as a type of investment fraud have been around for a long time. It's based on false promises to investors. Scammers claim that their investment will be profitable with little or no risk.

Like pyramid schemes, Ponzi schemes aim to attract lots of new clients to make investments. Then they asked them to involve their friends, family and colleagues.

But how do Ponzi schemes connect to cryptocurrency? And how do you recognize a Bitcoin Ponzi scheme?


How Do Ponzi Schemes Work?


Fraudsters start generating income by attracting new members. They use funds from new investors to pay off old investors and keep the scheme going. The bottom line is that scammers never invest their money. They use it to manipulate their investors into thinking they are making a profit. But, in fact, they are losing fast.

Ponzi schemes require a consistent flow of money to survive. When they can't recruit more investors and get lots of people cashing in, they usually go broke.

Fraudsters have used this principle in many investment-related industries. Recently, scammers tried to carry out Ponzi schemes on digital currency investments.

What makes this type of scam convenient is the fact that the culprit is much harder to track and has less regulatory oversight.

Are Ponzi Schemes Responsible for the Latest Crypto Crash?


In the last few weeks, the massive crash in the cryptocurrency market has taken over the headlines. The price has dropped dramatically, resulting in an estimated loss of $ 50 billion. The price of Bitcoin, which is around $ 10,000 / BTC is down by about 30%, which is unheard of.

At first, many experts thought that this fall was due to the recent global market turmoil. Today, many believe that the cause may be something else.

It seems that this big surprise was the result of PlusToken's sale of Bitcoin. PlusToken is a well-known Ponzi scheme that is prevalent in China and Korea. The initiators of this scheme managed to steal more than $ 2 billion worth of cryptocurrency from investors.

On March 11, the PlusToken fraudsters moved over $ 100 billion. Experts think that actors are selling cryptocurrency through a different mixer. This led to a large increase in supply, without sufficient demand to keep up. This results in huge market fluctuations.

As you can see, many investors are being deceived. When it comes to Ponzi schemes, anyone can become a victim. Let's talk about some red flags and how to avoid falling victim to this exploitation.

How to Recognize a Bitcoin Ponzi Scheme


While it can be a little difficult to spot, a few things link every Ponzi scheme. By studying all the signs, you can identify and fight potential problems. Here's how to detect a scam:

1. A Promise Too Good to Be True


Investors know that every investment has risks. "The higher the risk, the higher the reward" is a common expression in the world of investing. So when someone approaches you with a proposal that offers little or no risk, something is wrong.

Ponzi planners usually try to persuade their victims by claiming that they have a lucrative deal. According to them, there is almost no risk at all.

So, if it sounds too good to be true - it probably is.

2. Very Often Returns Investments


Return on investment fluctuates frequently, depending on the market situation. They are up and down and inconsistent. Be careful with investments that have consistent returns, regardless of market conditions.

3. Unregulated Investment


Fraudsters usually prefer investments that have not been registered by the Securities and Exchange Commission (SEC) or other regulatory body. This allows them to fly under the radar for as long as possible and keep the scheme going. Always stay away from unregulated investments.

Other Precautions to Be Taken
Currently, cryptocurrency theft and scams are on the rise. However, criminals are less likely to be caught.

If you haven't already, you should consider implementing security measures. They can help ensure that your cryptocurrency transactions are safe, private, and protected. Here's what you can do:

Install a VPN.


VPNs encrypt all traffic, which makes it difficult for hackers to track your activity. It is a common misconception that all cryptocurrencies are anonymous. They are pseudonyms, so it is possible to trace them back. Using a VPN with a killswitch and a strict no-logs policy can help.

Physical Security Key.


This is a piece of hardware that you can use to allow access to your cryptocurrency. This is a great way to reduce the risk of being hacked and traced as they must have a Physical Security Key to take any action.

Always be vigilant, diligent, and careful with your investment and safety. This is important for anyone who deals with cryptocurrency. Cryptocurrency related scams are becoming a lot more frequent. So don't forget to take as many precautions as possible.

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