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Crypto scams keep reinventing themselves year after year, fooling millions of investors. It takes a combination of witty words and convincing ploys, but they are often effective. Some are as cheeky as repeating the same scam under different names. How can people get ahead of them?

Get the Basics First

The basic principle of investing is to commit funds to an asset with the expectation of a future return. This future return can be defined or guided in a contract at the time of purchase of the asset. For most regulated assets, the expectation can be in the range of 5% to 20% depending on the economic environment.

Considering that some assets exceed the norm and increase significantly over time, it is normal to expect returns from any asset. The opposite is also true – that the asset can lose value over a given period. It can later recover its lost value and return a modest profit.

Crypto scams thrive on challenging the basics. They offer “guaranteed” returns within a week or a month. These guarantees are unfounded. They hook people by “paying off” the first one or two investments, but end up choking off the third. Avoid the trap of “guaranteed returns” at first glance, because the fundamentals of investing leave room for gain or loss.

Manage your expectations

Along with the basics, investor psychology is the next critical aspect to avoiding scams. Investment, in principle, takes time to bring a profit. While some investments can generate profits in less than a year, others take between five and ten years to show significant returns. Consistent analysis and study of an asset will show its performance or value over time.

take bitcoinsBTC as a digital commodity, its value went from cents in 2009 to a peak of $69,000 in 2021. Many people sold large holdings of Bitcoin in its early years when its price dipped below the peak of that year. Its future was uncertain, with no guarantee of a fixed price that could generate a profit.

Considering EthereumETH as a crypto asset, its peak in the 2021 bull market was over $4,500. It was founded in 2015. Many other cryptocurrencies or tokens are built within its diverse ecosystem.

Crypto scams often mistakenly copy or quote Bitcoin and Ethereum as the premise of high returns. They call their “offer” the next thing you need to buy after these two cryptocurrencies. By imposing a misplaced expectation, they mislead unsuspecting investors into hoping that they will cash in on the next attractive profit.

Commit your funds to different investments

Funds with a purpose are more useful than those without. Financial literacy and responsibility often guide the responsible use of financial resources. A personal budget, for example, can cover recurring expenses, investments, insurance, and miscellaneous liabilities. Besides financial instruments, it is healthy to invest in a holistic lifestyle. This includes meaningful courses, training, mentorship, experiences, relationships, health, and hobbies.

Such holistic commitment of financial resources for holistic growth provides the necessary balance to have restrictions or limits where they are needed. It would be difficult, for example, to gamble or spend money quickly, when there is constant discipline in more than one area.

The irony of a crypto scam is that it targets “idle” or uncommitted funds. The scammers insist that a person substitute something “unimportant” for the “deal of a lifetime”. By setting personal financial boundaries with a firm commitment to meaningful personal goals, you can preempt the likelihood of being scammed.

The so-called “deal of a lifetime” will pale in comparison to a holistic lifestyle.

Perform due diligence

It is easy to verify the existence or authenticity of a project or asset with a simple search. In a sea of ​​information and amid false impressions, it is necessary to cross-check the people involved in a specific project. Financial records, notaries or smart contract data can be accessed through various channels and platforms.

Due diligence is a simple way to ensure that a project, asset or business actually reflects what is being presented about it. During the emerging crisis of FTX’s fall last week, a due diligence investigation into its financial condition revealed flaws in its balance sheet. It failed to meet vital liquidity criteria and rumors of its insolvency made the situation worse. After about $6 billion in withdrawals, the exchange couldn’t keep up with its cash flow. He filed for Chapter 11 bankruptcy.

His whereabouts were kept under wraps until key staff began to quit and questions about his financial situation gained traction. When things didn’t go well, a series of unfortunate events led to its collapse. This is unfortunately not the first crypto project to do so. Others had clear warning signs of over-hyped token sales and opaque transactions.

Crypto scams often lack consistent and consistent facts about their operations. Due diligence will flag them early enough.

practice contentment

As an investor, it is essential to take gains when they come. Greed is often the best way to keep anticipating a profit beyond its viable window. Additionally, it leads to error in judgment in analysis, misinterpretation of seemingly obvious facts, and success bias.

Investing is a journey of a lifetime. Few people are lucky enough to make significant gains in a short time. The wise thing is to learn from those who have, rather than trying to copy their moves. Contentment is the key to making a 15% or 75% profit before this asset drops another 30%. It is rarely possible to determine when the price of the asset will fall.

In a bear market, like this year’s with various stocks and asset classes falling, the best thing to do is find undervalued assets and start investing in them for the long term. For others, the best thing to do in a bear market is to hone or increase the value of their time so they can earn more income.

Instead of relying on that inflated promise of a crypto scam, invest in your personal growth.