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Crypto Ponzi Schemes Hit Hard in 2020 To Some Users

Crypto Ponzi Schemes

June 22, 2020 | 

JOHN K MWANIKI |  0 Comments| 

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That the crypto sector is booming is an open secret. Several investors are looking to it as one of the best investment portfolios of 2020.

The need for the coins has even increased further after the few tantalus months at the start of the coronavirus pandemic. The investors have established that the currency is immune to the traditional economy's effects, making it a lot safer.

While the take-up of the coins has been on the rise, so have the crypto-Ponzi schemes. Operating like any other pyramid scheme, the crypto-Ponzi schemes has seen an increase in the number of fake coin offerings in the market. The number is so massive and is always on the rise. 

According to one of the leading crypto research firms, Cipher Trader, $1.4bn worth of crypto has been stolen this year through the Ponzi-schemes. The more crypto increases in value, the more the rise in scamming schemes. People are ever on the trend looking for an assured return on investment, which for now crypto looks to offer.  

The Rise of the Crypto Ponzi Schemes 

The crypto-Ponzi schemes have been so rife in recent years. Some of the leading researchers indicate that the world lost $4.3bn in 2019 to the schemes. These figures will most definitely go up as the need to have a hand in the sector sets in. 

One of the biggest scams in the crypto sector is the last year's PlusToken that was outed after scamming users of around $2bn.

Even though some of the people behind the scam are already arrested, there are still others using the platform to channel money out. At the time of arrest, they had already siphoned more than $185m. 

One of the reasons why the crypto Ponzi is successful is the anonymity of the crypto. The sector allows for private transactions without the risk of tracing the money.

Without proper regulation, scammers can quickly start a fake coin, entice investors to give their money, and then disappear without a trace. Some of the scams like One coin ran for so long before getting out.  

According to WeToken, 2020's crypto Ponzi scheme is likely to hit $1bn. Even though this seems like a reduction from the $4.26bn of the first six months of 2019, still, coronavirus might play a part in an increase in the schemes in 2020.

With the crypto market booming after the pandemic, most people are likely to consider it as an investment portfolio. The decline of the mainstream economy will also encourage people to look to crypto as the best alternative. 

Reasons for Success

After several successful Ponzi schemes, you might be wondering why they persist. That even with the knowledge that there are scammers in the game, investors still fall for it. Several reasons keep people susceptible to such a scheme.  

The first one is the lack of knowledge of the crypto operations. Being a new sector, investors are yet to understand everything there is to know about the coins. They are likely to fall for any site that offers returns on the coin investments. 

The other reason for the success of such schemes is the ability to leverage emotions. Such schemes understand that people are ever living in fear of losing money. They, therefore, tap into the insecurities by offering more of a sure investment.

They make it feel so safe to invest. Once one is tied emotionally, they not only invest their money but are also likely to invite others. 

The rise of the dark market has also seen an increase in the Ponzi schemes. The darknet market has increased the possibility of buying anything using Bitcoin in an open market. The prevalence of such market exposes users to frauds and other scams. 

Call for Regulations 

No matter how much investors become knowledgeable about cryptos, they are susceptible to scams. The best way to control the menace is through regulation.

With the government regulation in place, the scammers wouldn't have the leeway to withdraw funds from the schemes without raising alarms. The rules will also enact the need for licenses before starting operations. 

Bottom Line 

The Ponzi scheme menace is enormous in the crypto world. The more technology improves, the better the scammers get at their craft. This calls for due diligence before investing. It doesn't matter how much time you spend, as long as you put your money on a legit asset.

The need for a diverse investment portfolio is likely to fuel the schemes further in 2020. 

Also, be wary of deals that are too good deals to be true. While there is the likelihood of making a lot of money from crypto, there is also the possibility of losing all the investments. You are better off earning less than wasting all your investments.

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