7 Cryptocurrency (Bitcoin, Altcoin) Risks

7 Cryptocurrency (Bitcoin, Altcoin) Risks

Frauds, Scams and Other Risks for Owners of Bitcoin and Altcoin Cryptocurrencies

This article is arguably one of the first things anyone should read before diving deeper into the world of bitcoin, primarily because it could help protect you from losing hundreds, thousands, or millions of investments.

Bitcoin – or cryptocurrency – is not at all different from other interests. It also requires a certain level of the learning curve for anyone to maximize its potentials and reduce the risks associated with it. Because of these risks, it is a must to understand cryptocurrency inside out. After all, to play this game, one needs to put in hard earned cash and it is logical to protect it.

Like me, you probably saw a lot of announcements on various social media sites and email ads on how to double or triple your cryptocurrency investment or earn cryptos without spending anything. Below are some examples of what I mean.

Cryptocurrency risksbitcoin risks

Facebook posts aimed to attract viewers to join.

The thing with these posts is that they play and take advantage of two basic human emotions – fear and greed.

The fear of missing out and the thirst to get rich quick (greed). Combine these with the wishful thinking that one could bypass the system (no need to spend much effort or invest money) and you have a perfect formula for a person who could be easily scammed.


Another post aimed to get readers to sign up.

The best way to protect yourself is by becoming aware of these incidents and modus operandi. That way, you will be able to sense irregularities a mile away.

1. How Crypto-Scammers Work

The only difference between a Crypto-scammer and the ‘scammer’ in the pre-Bitcoin days is the “crypto” prefix. They operate using the same emotion-targeting methods in order to trick naive victims into giving private access keys or hard-earned resources in exchange for get-rich-quick schemes.

Crypto-scammers are the same con-artists who lived off loopholes in the fear, greed or kindness of their victims. These criminals take advantage of perceived social prejudices that became weaknesses to a lot of individuals vying to get a better life.

The Bait

Once the person chews on the bait, the scammer will then present an elaborately attractive scheme on how to receive the great offer, which will include:

  • 1asking for the prey to create a cryptocurrency (i.e. Bitcoin) wallet;
  • 2deposit a small amount of BTC (the amount of which could dramatically increase or decrease how much they can get in return);
  • 3require the user to divulge secret infos such as private keys, or require the victim to transfer the amount from own wallet to the wallet of the scammer promoting the scheme.


Watch out for shortened URL that doesn’t show an overview of where it leads.

TAKE NOTE that the victim has already fallen prey and blocks any thoughts that this is a scam even though there are already red flag warnings setting off in the person’s thoughts.

How to Protect Yourself

Always remember that nothing is free or if something is too good to be true, then it is a trap. The best way to protect yourself is to remember how they operate so you can easily identify if an offer is a scam.

baits cryptocurrency risks

The bait starts when the reader accepts the challenge and types in ‘FREE’.

2. Malware Attacks

Those who fell prey to scam posts offering get-rich-quick schemes or Bitcoin doublers may also become victims of hacking.

This occurs when clicking on certain links leading to websites that auto-download malwares – tiny softwares that capture keyboard strokes and sends them to the malware creator.

cryptocurrency mallware

The bit.ly shorted URL may lead to malware.

In most cases, victims of these incidents are not aware that a malware has already been installed and after days, weeks, or months of use, that’s the time when the malware creators make use of the collected information to access the victim’s accounts (not just cryptocurrency-related ones).

How to Protect Yourself

1. Learn
2. Earn
3. Store

Do not click on any link from posts or offers similar to the one above. Always double check URL links before proceeding to see if they should be a cause for concern.

3. ICO Scamcoins and Airdrop Craze

Before we proceed with this subtopic, let us first define ICO and Airdrop. ICO means Initial Coin Offerings and could be compared to Initial Public Offering (IPO) in the stock markets. It is here when companies initially offer created cryptocurrencies in exchange for fiat (USD, EUR, YEN, etc), Bitcoin or other stable cryptocurrencies.

Airdrop is used to denote giving away of free cryptocurrencies – usually tokens that are being sold during ICOs and normally use Ethereum blockchain. To do so, a program (smart contract) is deployed to search for crypto-wallets then automatically sends tokens based on rules – like the wallet has to contain 0.1 ETH.

ICO Scamcoins and Airdrop Craze

An exact replica of the OmiseGO website

In the last few months, a lot of new altcoins (alternative coins) came out via airdrop campaigns. Many of these tokens have names based on existing cryptocurrencies. The only difference is a letter “e” prefix on them (i.e. eBTC, eLTC, eIOTA). Airdrops, in essence, are fine. The problem starts when the developers of those airdrops start requiring one to divulge more information or require one to sign up and buy their ICOs to be approved and be listed. Some of these airdrop announcements even claim to come from existing cryptocurrencies with good standing – such as OmiseGo.

A Steemit user, for example, posted a warning about an Airdrop that seemed realistically from OmiseGo company, but upon further investigation, it is a scammer who almost tricked the blogger into giving out the private key.

ICO Scamcoins and Airdrop Craze

Notice how they try and convince users to fill in their private keys.

A similar incident was posted on Medium wherein the scammer created an exact replica of the Status Network Token’s website and even used a similar domain name. This website claims to give free SNT tokens via airdrop but requires the person to verify the existence of the wallet address by requiring the user to submit the private key via the form found within the scam site.

website replica

This also tries to convince users to put in their private keys.

How to Protect Yourself

Do further research about ICO and Airdrop offerings. Ask advice from social communities related to Cryptocurrency or the coin. Be wary of anyone contacting you directly about emergency changes that require you to input your private key into a form – even if it looks exactly like the official website, or the person who contacted you has the name of the company CEO.

4. Phishing Incidents

Hundreds of thousands of dollars have already been lost due to phishing incidents that target Ethereum users worldwide. So what exactly is phishing? Phishing is a more elaborate version of crypto-scamming method than the airdrop tactics mentioned above. Unlike the promise to get free cryptocurrencies, phishing scammers go to great lengths in coercing victims to access their accounts on a fake wallet website. The most common of these schemes target MyEtherWallet service, whose users were reported to have lost up to $700,000.00 in a series of incidents that last for a week last July 2017.

How to Get Phished

These crypto-scammers were able to pull off this kind of heist through Reddit, Slack and Telegram cryptocurrency communities.

phishing scammers bitcoins

One of the scare tactics used by scammers.

Through these platforms, scammers were able to send private messages directly to users with contents that vary from scaremongering tactics about losing cryptocurrencies in wallets if the target victim does not check on their wallet balance.

phishing bitcoins

Another scare tactic sent directly via private Slack message.

These messages are tailored to sound like official statements of various cryptocurrency groups and may contain messages about hard forks, problems with the network, or token database as shown above.

The victims are then given a link along with the message (see screenshot), which leads to the phishing site – a malicious fake MyEtherWallet website. The example below shows two websites with the same domain name (myetherwallet) but the fake website uses an extra “.co” on its domain name.

Scamers use various platforms to trick you
Allwas check the URLs and the links

fake phishing websitephishing bitcoin wallets

Always double check the URL.

Those who are not careful will not notice the slight difference in the website’s URL which could be just a difference between having a capital letter “i” instead of a small letter “L” that looks the same using the standard font of any browser’s URL field, or the use of a special “t” character with a small spec under it (check below).

phishing url

The slight difference in the website’s URL.

How to Protect Yourself

Always double check the URL and do not click on any link from advertised results from search engines. For MyEtherWallet, always make sure the URL is https://www.myetherwallet.com – anything else with the words myetherwallet in them are scam websites.

5. Hacks and Exploits

Another risk that cryptocurrency investors and owners face is the chance for their crypto properties to be subject to hacking incidents such as the Parity Wallet Hack that happened last July 2017, wherein hackers managed to steal over $71,910,000.00 (153,000 Ethers) from various institutions.

Similarly, various cryptocurrency exchanges became subject to hacking – the biggest of which happened to Mt. Gox (2014), which resulted to the loss of $473 Million worth of Bitcoins from customer accounts of the said exchange. Blockchain vulnerabilities also subject users’ accounts to get hacked like the Decentralized Autonomous Hack (June 2016) that caused the loss of $75 Million worth of ICO funds and led to the branching out and creation of the Ethereum (ETH) blockchain.

stealing bitcoins

BTG management tweeted and supported a wallet that ended up stealing investors’ funds within their endorsed wallet.

The latest recorded incident (Nov 2017) occurred within the “controversial” blockchain platform of Bitcoin Gold – who aim to become a better version of Bitcoin. Arguably, Bitcoin Gold management carelessly allowed and endorsed a third-party wallet provider who eventually managed to take $3.2 Million worth of Bitcoin Gold tokens.

You might be interested in:How to Safely Store Your Bitcoins?

How to Protect Yourself

It is recommended that one makes a judgment on which cryptocurrency to invest in after a thorough review of it, especially when choosing the type of wallet to use. “Only invest what you are willing to lose,” and “do not put all your eggs in one basket” are two very important rules that a lot of investors go by.

6. Legit Project Turned South

There are cases when promising ICOs turn from being one of the best ventures into the worst. These could be due to negative hypes, technological hurdles that delays the development (see screenshot below), or falling apart of the team like what happened to Tezos, who raised $232 Million worth of funds in its July 2017 ICO.

Legit Project Turned South

Verge unable to keep to the deadline.

In this case of Tezos, a huge decline in the value of Tezos was seen right after various press releases and news came out regarding the management problem they are up against.

How to Protect Yourself

There are methods being developed to know how to rate an ICO – whether it is scammy looking or if it could really go the miles it committed to upon initial presentation. More and more initiatives are also being put up to help determine whether an ICO could really deliver. Furthermore, and as stated earlier, it is best to only invest what one is ready to lose, and to diversify the investment.

7. Other Disadvantages of Cryptocurrencies

Keeping the Cryptocurrency in Wallets

Each cryptocurrency requires a certain process to create a wallet and transfer coins into the wallets. This proves to be a daunting task especially for non-techie individuals who simply want to own or invest in this technology. Wallets are accessible through private keys or a set of seed words. If one loses or forgets these, then the cryptocurrency is lost as well.

On the bright side, there are companies that offer to provide wallets along with other financial services if one invests using their platforms. Before using various types of wallets, make sure to read more than one review related to them and ask through various social networks.

Risks on Transfers from One Wallet to Another

Because the technology is still relatively new, a lot of cryptocurrency owners are yet to understand the difference in blockchain platforms among similar cryptocurrencies. Ethereum (ETH), for example, gets associated with Ethereum Classic (ETC) and there are owners of ETH who accidentally sends to ETC wallet addresses and losing their coins in the process.

To avoid having this problem, double or triple check the source and destination wallets like how you checks grocery receipts in case some items get double scanned.

Time it Takes to Transfer Cryptocurrencies

This is also referred to as the block time and pertains to how fast before a cryptocurrency successfully transfers to another wallet. Even though each type of cryptocurrency is continuously working towards the improvement of its blockchain, the transaction times are still slower when they pale to other financial services such as VISA. As of this writing, Bitcoin takes about ten (10) minutes to record a set of transactions into a block and produce its first transaction confirmation. Alternatively, Ethereum takes about fifteen (15) seconds.

An article last April 2017 wrote a comparative report about Bitcoin, Ethereum, Visa, and Paypal – comparing the number of transactions each can process per second. The writeup stated that Bitcoin has an average of 3 to 4 transaction per second, Ethereum makes 20, Paypal can handle 193 transactions, and Visa handles 1,667 transactions per second.

Establishments that Accept Payments of Cryptocurrencies

As a new technology that is still in the early adopter’s stage – where institutional investors just started getting into the action, cryptocurrency usage has not fully been realized globally yet. There are only a few countries like Japan that embraced and officially accepted it as a currency. Nevertheless, there is a list of establishments that already accept payments in Bitcoins and an online freelancers marketplace that accepts Ethereum.

In spite of this, the market capitalization of the whole Cryptocurrency space is already US $309 billion (coinmarketcap.com), an increase from around US$25 Billion last March 2017, to the present (November 2017). Ironically, this figure proves such problems are not enough to stop the growth of cryptocurrency usage.


Safety measures are a must. The longer one spends time and resources into cryptocurrencies, the more these measures get polished. For beginners, the following are a summary of ways to protect your crypto-investment shown in each of the subtopics above, along with other helpful ti.

  • Do not fall for get-rich-quick schemes and offers. If it is too good to be true, chances are it is false.
  • Bigger investments could be better held in Hardware Wallets or Paper Wallets than in online wallets. Just make sure to safely store the private keys that go along the wallet type you chose.
  • Secure the Laptop that you use when you want to access your cryptocurrency investments. If you love visiting various types of websites, then do so using a different unit to avoid getting infected by Malwares or other malicious hacking codes.
  • Always get yourself updated with the latest news regarding the crypto-investment you are holding.
  • Do not share your Private Keys or Private Key QR code with anyone. Be careful when doing a selfie showing your private keys or else you might end losing whatever is in your wallet.
Kevin Low
the authorKevin Low
Joined the crypto party in 2016, Kevin have witnessed the crazy volatility of the market. A firm believer of the term HODL and bagholders of ETH, NEO & BNB. He is a huge fan of Vitalik Buterin and CZ. Spend lots of time researching on crypto and love to share it on CryptoPositive.com.

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