By Vikram Subburaj
As with any new industry involving money, the scale and impact of frauds in the global crypto market is growing. Scamsters, fraudsters, and subversive minds have not spared either seasoned investors or novices in the ecosystem. Some hapless people have lost their life’s savings as they fell for the promises of unusual and disproportionate returns, through online and offline means. These fraudulent schemes also serve to undermine the general trust in the virtual digital assets (VDA) space.
As the adoption of VDAs grows and more countries mainstream it, there is an increased need for stronger vigilance and due diligence when considering investments in this highly volatile market. This must start from you, the investor. While the authorities and companies can help in certain cases post an event, it is easier to avoid getting involved in such by better education and a well-defined risk-reward ratio.
Today, we look at some ways in which investors can safely navigate the crypto space.
Exercise caution & spread your storage risks
Exercising caution and due diligence is paramount throughout your crypto investment journey. It requires a commitment to comprehensive research and a deep understanding of the market dynamics and its inherent risks. By staying informed, you empower yourself to make sound decisions.
In terms of storage, other than storing VDAs with trusted exchanges/platforms, spread your assets to include consideration of hardware or software-based personal wallets. If you are a Web3 user and store VDAs in software wallets, beware of permissions you give to protocols that you interact with. Some users give full permissions to random protocols which can wipe out your balance in a jiffy.
Choose reputable Indian crypto exchanges
One of the fundamental steps in mitigating the risk of fraud is selecting established and reputable Indian crypto exchanges. Before you invest, assess the exchange’s reputation and the credibility of its promoters. Trustworthy platforms prioritize security and transparency. Trust local exchange platforms as they are answerable to Indian authorities while abiding by compliance and tax requirements of the land. Also, we advise users from using Peer-to-Peer
(P2P) exchange of assets – these fall under a shady area and often are linked to suspicious money flows that authorities are cracking down hard on.
Stay informed, be vigilant
In India, VDA/crypto exchanges are actively involved in safeguarding investors through educational campaigns, enhanced security measures, and robust reporting mechanisms. Stay informed about these initiatives and actively engage with them to enhance your safety in the crypto space.
Vigilance means recognising red flags associated with fraudulent schemes. Be cautious of investments that promise unrealistically high returns, unverified operators, new products with extravagant return offers, ponzi schemes, commission-driven promotions, and multi-level marketing (MLM) tactics. Remember, if it sounds too good to be true, it is not good for you.
Also, remain protective of your OTPs and 2-factor authentications. Do not share your login passwords/OTPs to platforms to anyone including support staff of crypto exchanges.
Understand your risk tolerance and invest in bluechips
Perhaps the most critical aspect of crypto investment is understanding your risk tolerance. Never invest more than you can afford to lose. Diversify your investment portfolio to spread risk across different assets. This way, you can weather market volatility better.
In the crypto world, not all assets are created equal. Focus on VDAs with a solid foundation and real-world utility – Bitcoin and Ethereum as a start. Avoid investing in projects that lack substance or have little-to-no technological or practical use. A strong foundation is the bedrock of a reliable investment.
Seek expert advice
Never underestimate the value of expert advice. In your investment journey, engage with professionals well-versed in the crypto space. Their guidance can help you make informed decisions and significantly reduce the risk of falling prey to scams.
The crypto market presents both exciting opportunities and significant risks. As the space continues to evolve, it is crucial to remain vigilant and proactive in protecting your assets. By conducting thorough research, verifying the legitimacy of platforms and projects, and safeguarding your investments, one can significantly reduce the risk of falling victim to financial frauds in the crypto space.
The author is CEO, Giottus Crypto Platform
