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How to Avoid Bitcoin Scams

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Since bitcoin’s inception in 2009, it has grown exponentially making it a widely popular digital currency that is used around the world. Unfortunately, it is due to the popularity of bitcoin and its market cap growth rate that scammers are realizing the monetary benefits they could get from it.

According to Bitstamp, the first fully licensed bitcoin exchange, the bitcoin to USD market cap is more than $11.3 billion, with the cost of one bitcoin around the $708 mark, at the time of publishing. It goes without saying that the bitcoin space and its worth has attracted online scammers who want to get their hands on the digital currency by employing devious methods in the process.

Of course, regardless of whether you are a newbie in the bitcoin space or you’ve been dabbling in the technology for a few years, it’s always a good idea to keep yourself up-to-date on the bitcoin scams. Here we will highlight the existing bitcoin scams that people should be aware of and what you can do to avoid becoming a victim of one.

  1. Bitcoin Exchange Scams

These types of scams may not necessarily be easy to decipher simply because the organizations may have a high standing level within the bitcoin space. There are some, though, that do fall through the net. For example, in 2014, the digital currency exchange platform, Cryptsy, is reported to have lost 13,000 BTC and 300,000 LTC after the exchange was hacked; however, it then proceeded to fail to inform its users of the situation for fear of causing mass panic. This has led many to believe that Cryptsy is Mt. Gox’s junior.

Mt. Gox, the now defunct Hong Kong-based bitcoin exchange, grabbed headlines back in 2014 when it was revealed that around 850,000 bitcoins were stolen, at the time worth around $450 million. While 200,000 bitcoins have since ‘returned’, many users of the exchange are still awaiting an outcome for their stolen money.

What Can You Do: In this situation, the best course of action is to only use the services that you completely trust. Unfortunately, with the above exchanges they were, at one point or another, trusted exchanges.

So what can a person do?

One solution is that instead of putting all your eggs in one basket, why not split what you have into different wallets. This way you can rest assured that not everything you own will be lost if an exchange does get hacked into. Also, research the failings of exchanges such as Mt. Gox and you’ll see that there were warning signs beforehand. By knowing what these are you can keep them in mind when checking out other bitcoin exchanges.

Of course, before parting with your money it’s wise to proceed with a level of caution, and be mindful of any exchanges that simply avoid answering queries in an attempt to ignore a crippling situation.

  1. Phishing Scams

Surprisingly, phishing scams have been known to target those within the bitcoin space. In 2014, the popular digital wallet, Coinbase, was reported to have allowed mass phishing while leaking user information. According to a report, users were receiving emails asking them to make a payment to another user.

phishing locks

In July, following the disappearance of bitcoin mining company, HashOcean, with millions of dollars worth of users’ bitcoin, phishers attempted to get victims to part with their money claiming they could recover their stolen bitcoins. In a bid to lure unsuspecting victims they used fake websites, Facebook pages, and phishing emails.

What Can You Do: To avoid becoming a victim of a phishing scam, don’t click on any sources that haven’t been verified. If something doesn’t seem right to you, always proceed with caution. After all, it’s much better to be cautious in the first instance rather than finding out too late that you’ve unwittingly lost your money.

  1. Fake Websites

It’s believed that if you scan a document that has words scrambled up you can still read what it says as long as the first and last letter are in their right place.

So, when it comes to someone trying to make a fake website appear real they may use some part of the genuine website’s URL, but take out one letter. An example of this was revealed earlier this year when a Reddit user announced that they had lost bitcoins after using a fake website unknowingly. The user believed that they were using the digital currency exchange ShapeShift.io; however, it was only after realizing that there was a missing ‘F’ in the fake website’s URL that ShapeShift was notified.

Not only that, but the Hong Kong-based exchange, Bitfinex, had to alert its users of phishing emails this year after phishing emails were being circulated from an address that appeared to be one of its own.

What Can You Do: Avoid clicking on sources that haven’t been verified. Even if a website looks legitimate, always remember to check the correct spelling of the URL before proceeding.

  1. Ponzi Schemes

A good maxim to live by is ‘if it sounds too good to be true, it probably is.’ That’s certainly the case with Ponzi schemes.

In most cases, it’s easy how to detect a Ponzi scam, and yet while this is the case, people still fall victim to them.

Why?

Because the operators of Ponzi scams know what to say to get people involved: the promise of great return on investments (ROI) without needing to do much to achieve it. Gavin Andresen, a well-known bitcoin developer, is reported as saying that he believes that ‘bitcoin cloud mining companies will turn out to be Ponzi schemes.

pyramidscheme

In 2014, Trendon Shavers was arrested, and later sentenced to 18 months in prison, after his involvement in a bitcoin-related Ponzi scheme. Reports state that he obtained around 146,000 BTC from investors, amounting to around $807,380 during the time of the scheme.

Another Ponzi scheme that has since ceased was CryptoDouble. In 2015, it ceased all operations after promising its users’ that it would double deposits within 100 hours. It was reported that around 2,233 BTC, amounting to about $500,000 at the time, had been cashed out leaving thousands of customers out of pocket.

What Can You Do: As mentioned before, if it sounds too good to be true, then it probably is. Avoid investing in something that over promises on ROI that guarantees a return. Even if a bitcoin company has received positive reviews, don’t jump in straight away. Be wary and do your research beforehand. You’ll thank yourself later that you did if an investment that you originally believed to be true turned out to be a Ponzi scheme.

Conclusion

Unfortunately, as the world of bitcoin continues to grow grabbing the attention of people who are keen to invest in a new technology that promises great things, bitcoin scams will also remain a prevalent factor.

This does nothing to help improve the space and is more likely to hinder its growth as scam victims shy away from any further investment in the currency. Furthermore, a lack of regulation also means that it’s easier for scammers to target people in the bitcoin space.

As such, it’s unlikely that scams involving bitcoin will stop anytime soon; however, by being aware of the different types of scams it makes it easier for someone to avoid becoming a victim and losing potentially thousands of dollars, with no way of recovery, in the end.

Images from Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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Bitcoin

Bitcoin Price Resumes Holding Pattern as Futures Trading Soars

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The bitcoin price remained locked in a sideways pattern on Thursday, as virtual exchange volumes continued to retreat following a sharp early-week spike. However, a new report from the Chicago Mercantile Exchange (CME) confirmed a sharp increase in trading in bitcoin futures contracts, a sign that institutional investors were flocking to the asset.

BTC/USD Update

Bitcoin’s price is currently averaging $6,543 on major exchanges, according to CoinMarketCap. The leading digital currency continues to trade at a premium on Bitfinex, where prices hover around $6,720. In both cases, BTC is virtually unchanged compared with 24 hours ago.

The digital currency market has experienced very little change over the past three days as trade volumes continued to dry up following an unexpected upsurge on Monday. Bitcoin’s trade volumes are back down below $4 billion,

BTC is up nearly 4% this week, having adding more than $4 billion to its market cap. The digital currency is currently valued at $113.4 billion for a 53.7% share of the overall market.

The crypto market cap was valued at $211.1 billion on Thursday. Trading volumes across all major assets averaged $11.6 billion compared with 24 hours ago.

Bitcoin Futures Volumes on the Rise

Institutional interest in bitcoin appears to be on the rise, according to the latest trading data published by CME Group. Trading in CME bitcoin futures contracts jumped 41% in the third quarter, with the total number of open contracts increasing 19%.

Bitcoin futures contracts have recorded an average daily trade volume of 2,582 this year, with open interest reaching 2,696 contracts. Volumes appear to have spiked throughout the month of September, reaching a high of 5,881 contracts on Sept. 21.

The following chart, courtesy of CME, provides an overview of bitcoin futures volume based on notional value traded and open interest.

Bitcoin futures appear to have had a stabilizing effect on the market, a contrary view to the one proposed by the San Francisco Federal Reserve, which argued that securitization induced more volatility. Volatility in bitcoin’s spot price has been declining all year long, having recently touched new 17-month lows.

Over the past 30 days, bitcoin’s price volatility has averaged less than 2%, according to bitvol.info. The website’s volatility tracker reads 2.91% over the last 120 days and 3.82% over a 252-day window.

The CME futures contract expires at the end of the month. The contract offered by CBOE closes toward the middle of the month.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 647 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Analysis

Crypto Update: Coins Edge Lower in Quiet Trading

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The cryptocurrency segment continued to trade without momentum in the past 24 hours, as although some of the small-cap coins experienced heavy trading the top currencies are virtually unchanged. The technical setup is also little changed, with only Stellar getting closer making progress since the Monday market-wide spike. Ripple, which was also among the more active coins couldn’t maintain its momentum, while Bitcoin and Ethereum got stuck in very narrow short-term ranges.


BTC/USD, 4-Hour Chart Analysis

Bitcoin continues to trade between the $6275 and $6500 levels, as another very narrow trading range developed following the Tether-indices surge. The most valuable coin is still well below the previously dominant broad triangle pattern after last week’s breakdown, and the short-term sell signal remains in place in our trend model.

While the long-term setup is neutral, traders should still not enter positions here, with further resistance levels ahead at $6750 near $7000, and with support levels also found near $6000, $5850, and between $5000 and $5100.

Stellar/USDT, 4-Hour Chart Analysis

Stellar drifted above the key support zone that surrounds the $0.24 price level which also marked the top of the Monday rally. Should the coin hold above that level, a new short-term uptrend would be established even as the broader declining trendline is just ahead, and traders could enter small positions in anticipation of a break-out. That said, given the bearish segment-wide pressures, these setups are still to be treated cautiously, as no leadership has been established.

Top Coins in Deadlock as Long-Term Setup Still Bearish

XRP/USD, 4-Hour Chart Analysis

Ripple is still holding on above the key $0.42-$0.46 zone, but it still failed to show meaningful follow-through after the move out of the triangle consolidation pattern, and a new short-term uptrend is still not confirmed, so traders should still not enter positions here.  XRP faces strong resistance levels near $0.51, $0.54, and $0.57, while further support levels are found at $0.375 and near $0.35.

ETH/USD, 4-Hour Chart Analysis

Ethereum is trading in a similarly narrow trading range as Bitcoin, also on a short-term sell signal, with the focus being on the $200 support level. Ethereum’s long-term outlook is still clearly negative, with the broader declining trend being intact, and a move towards the bear market low remains likely in the coming weeks.

Traders and investors should stay away from the coin, despite Monday’ spike, as we expect the downtrend to resume soon. Strong resistance levels ahead at $235 and $260, while support is found at $180, $170, and $160.

LTC/USD, 4-Hour Chart Analysis

Litecoin also failed to make progress since Monday and a move below the $51 support level is very likely in the coming week. Below that support is found near $51 and the bear market low at $47, while the major zone of interest is near the $44 price level.

The weakness of LTC is a bearish sign for the whole segment, and traders should still not enter positions here, with strong resistance levels ahead near $56, $59, and $64.

Featured image from Shutterstock

Disclaimer:  The analyst owns cryptocurrencies. He holds investment positions in the coins, but doesn’t engage in short-term or day-trading, nor does he hold short positions on any of the coins.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 378 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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Altcoins

Why Would Anyone Have Faith In Tether?

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I don’t want to get sued for slander so let me explain the reasoning beyond today’s title. After all of the turmoil surrounding Tether on Monday, how can the price be anywhere near the $1 parity level with the US dollar?  After more than a year, how can anyone have confidence in Tether and their common law partners Bitfinex when, for example, Circle, backed be the highly respected Wall Street giant Goldman Sachs offers an alternative?  We should also mention that Circle is just one of many so called stable coins.

It isn’t hard to find a list. Exchanges are feverishly adding stable coins. Singapore based Houbi is adding Paxos Standard Token (PAX), True USD (TUSD), Circle (USDC) and Gemini (GUSD).  

When Stable Coins Cause Instability

Well, the evidence is mounting as the months move along that so called stable coins can have the power of creating anything but stability.  This week’s experience with Tether, Bitfinex and the price explosion of Bitcoin demonstrates that there are still dangers lurking. This is why trust is important.

Monday’s gyrations were not the first questionable moment for Tether.  The coin, which gains its intended stability by being tied on a one for one basis with the US dollar, has been the subject of questionable behavior all year.  

As far back as January trade sources were expressing concern the Tether was responsible for last December’s major price bubble in Bitcoin.  The frenzy over Bitcoin set off speculation across the entire crypto spectrum. But that was just the beginning.

In June Bloomberg reported on a paper by John Griffin, a finance professor at the University of Texas, that among other things claimed 60% of last year’s price move in Bitcoin was the result of manipulation surrounding Bitfinex. That directly implicates Tether.

Using algorithms to analyze the blockchain data, Griffin’s team found that purchases with Tether were timed following market downturns and result in sizable increases in Bitcoin prices. Less than 1% of hours with such heavy Tether transactions are associated with 50% of the meteoric rise in Bitcoin and 64% of other top cryptocurrencies.

These findings prompted the US Commodity Futures Trading Commission to step in with a series of subpoenas.

Tether’s coins had become a popular substitute for dollars on cryptocurrency exchanges worldwide, and for good reason. They are anonymous, closely tied to the value of the US dollar and can be used in exchange for Bitcoin, Ether or about 10 other cryptocurrencies.  Tether is closely associated with Bitfinex, with whom they share common shareholders and management.

Bitfinex has offices in Hong Kong but it is legally headquartered in the British Virgin Islands. In May they announced plans to move to Zug, Switzerland. Bitfinex has a sorted history of poor security, having lost nearly $100 million worth of Bitcoin from customer accounts. Moreover, while claiming to have total one for one US dollar backing for each Tether, real proof is absent.  

Further Evidence of Manipulation

Over the course of this year, as we have gathered digitally to witness the loss of nearly $600 billion in crypto value, everyone has been looking for the culprit. When I first read of some of the academic studies that blamed the advent of futures trading on the CBOE, I laughed. Honestly, I believed the real cause of the rise and fall of crypto were a well connected group of billionaires that together had the power to move markets.  

Well the folks at Chainalysis have just produced some surprising research results. Their Blockchain Intelligence Platform powers investigation software for some of  the world’s top institutions. These guys don’t do surveys, the have their hands on big data that is able to detect some interesting stuff.

Chainalysis released a new report last week showing that the so called Bitcoin whales are not responsible for price volatility. The study examined the 32 largest BTC wallets, which reportedly represent 1 million BTC, or around $6.3 billion. That is a pretty solid sample size.

The data revealed that the BTC whales are do not act in concert with one another. In fact not only are they a diverse group but about two thirds behave like longer term investors. Instead of being FOMO (Fear Of Missing Out) types, on net they have traded against the heard buying on price weakness.

Putting The Pieces Together

The crypto world is bombarded with globally generated news on an hourly basis. But what does all of it mean anyway? Hopefully this article adds some perspective on what and who has been responsible for the direction of crypto prices over the past year.  As more of these weak players are identified and depleted of their business, real investors will have the confidence to return to the market.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.4 stars on average, based on 114 rated postsJames Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.




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