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How do crypto scams work?
Whenever there is money involved, scammers are not far away. In crypto, people use the term “rug pulled” - which means someone pulled the rug from under you and your investment tanked. But how does that work?
It’s easy to create your own coin and hype it. In fact, don’t trust anyone promoting a crypto currency on TikTok and the like – people pay tens of thousands of dollars to those influencers to create a fake image of popularity for a specific coin. It works like this: Scammers buy a large amount of a very low value coin for next to nothing. Then they pump a ton of money into promotions, and if people start buying into the scam, prices shoot up. Suddenly the scammers' holdings are worth a lot more than they spent on promotions and they will sell it all. And because they own so much, the minute they sell it, your value plummets.
That’s called a “pump and dump”. So be on the lookout for anything that looks fishy and only trust third party resources. Anyone can create a coin, a website, and pay influencers.
It’s tempting to make a quick buck and seemingly everyone does these days. But always ask yourself: Does that all actually make any sense?
And next time we’ll explain what Crypto ETFs are.
Disclaimer: This podcast references our opinion and is for information purposes only. It is not intended to be investment advice. Do your own research and seek a duly licensed professional for investment advice.
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