The three most common Bitcoin scams, and how to avoid them

Scammers and hackers are coming for your Bitcoin. Whether it’s a financially motivated lone wolf attacker or state-sponsored groups linked to hostile nations, these bad actors are constantly looking for new and novel ways to move your Bitcoin into their wallets.

The key to staying one step ahead is knowledge. And that’s what this latest study from CoinKickoff is all about. Using data collected from chainabuse.com and blockchain.info, they’ve put together a series of charts that highlight the most common types of Bitcoin scams, and when they’re most likely to happen.

And to help you hold on to your precious BTC, we’ve added a short section highlighting the best ways to avoid being the next crypto victim.

Is Bitcoin a Scam?

Bitcoin’s legitimacy as a digital currency is a subject of debate. Supporters argue that its decentralization, transparency and acceptance by mainstream institutions make it a viable store of value and an inflation hedge.

However, critics highlight the lack of regulation in the cryptocurrency market, Bitcoin’s price volatility, its pseudonymous transactions and its susceptibility to market manipulation as potential red flags.

Why do scammers target Bitcoin?

The Bitcoin ecosystem has many features that are attractive to hackers and scammers.

Bitcoin transactions are not directly linked to people’s real identity, so it is easier for them to hide their tracks or ill-gotten gains. And once you send Bitcoin to an address, it’s impossible to claw back, and there are no Bitcoin regulators to complain to or fight your case.

Its global nature makes Bitcoin a useful tool for criminals moving stolen funds around the world.

And finally, a lack of education and a younger user base means that hackers view many Bitcoiners as naive and are more likely to fall for scams, such as phishing or giveaway scams.

A List of Bitcoin Scams

Here’s a look at some of the most common Bitcoin scams:

Phishing Scams: Scammers create fake websites or emails that look like legitimate Bitcoin services or exchanges to trick users into revealing their private keys or login credentials.

Ponzi schemes: Fraudsters promise high returns on investments in Bitcoin, but they use funds from new investors to pay returns to earlier investors, creating a pyramid scheme that eventually collapses.

Fake wallets: Fraudulent mobile or desktop wallets are created to steal the private keys and funds of unsuspecting users.

Fake exchanges: Scammers set up fake cryptocurrency exchanges that look real but are designed to steal users’ deposits or personal information.

Impersonation Scams: Fraudsters impersonate well-known figures in the cryptocurrency industry on social media, often asking for donations or investments in exchange for false promises.

Tech Support Scams: Scammers claim to be from a cryptocurrency exchange’s tech support team and ask for remote access to your computer to steal your funds.

Giveaway scams: Scammers pose as celebrities or influential figures on social media, and promise to send you more Bitcoin if you first send them a small amount. They never send anything back.

Fake mining operations: Scammers offer cloud mining contracts or mining hardware at attractive rates, but never deliver the promised returns or equipment.

Ransomware attacks: Hackers use malware to encrypt a victim’s data and demand Bitcoin as a ransom payment to unlock it.

Fake Airdrops: Scammers promise free cryptocurrency tokens in exchange for personal information or a small payment.

The three most common Bitcoin scams

Data collected by the CoinKickoff researchers reveals the top three most reported crypto scams since 2018. They are:

Blackmail (85,534 reported cases): Bitcoin blackmail involves threats to reveal compromising information unless a payment is made in Bitcoin. Scammers exploit the pseudo-anonymity of the cryptocurrency to hide their identity, making it difficult for victims to recover funds or trace the culprits.

Sextortion (61,298 reported cases): Sextortion scams involve threats to release intimate or compromising photos or videos of the victim unless a Bitcoin ransom is paid. Victims are often contacted by email, with scammers claiming to have hacked their devices or online accounts. Paying rarely guarantees safety against future extortion attempts.

Ransomware (61,018): Ransomware is malicious software that encrypts a victim’s files or locks them out of their system. The attacker then demands a Bitcoin payment in exchange for the decryption key. These attacks target individuals, corporations and public institutions, causing data loss and financial pressure. Regular backups and robust cyber security measures are essential for protection.

The Year of the Scammer

The year 2020 was a good year for Bitcoin. The world’s largest cryptocurrency was in the middle of another bull run that would eventually push the price to nearly $70,000.

But the increased attention and the allure of quick riches attracted new and inexperienced users, and it didn’t take long for the sharks to start circling. There were over 35,000 reported scams in 2020; this is more than any other period in Bitcoin’s history.

Since then, the number of reported scams has decreased dramatically. In the first six months of 2023, there were fewer than 6,000 cases. But this could be the calm before the storm. Another bull run is scheduled to start in mid-2024, so expect an increase in scammers trying to trick new investors out of their Bitcoin.

How much Bitcoin did scammers get?

Scammers steal obvious amounts from Bitcoin holders and investors.

In 2018, they stole over $2 billion in Bitcoin. That figure rose to more than $6 billion in 2019, followed by another rise to $18 billion in 2020.

But these are paltry gains compared to the value of all the looted Bitcoin in 2021. Data analyzed by CoinKickoff shows that hackers and cybercriminals have made more than $55 billion by stealing Bitcoin.

So where is it all going, and who has it now?

Nobody really knows.

Stolen Bitcoin usually goes through a complex web of transactions to disguise its origin. Cybercriminals who steal Bitcoin often use various techniques such as mixing services, tumblers and darknet markets to launder the funds and make them challenging to trace.

Identifying the responsible parties can be extremely difficult due to the pseudonymity of Bitcoin. Transactions are recorded on a public ledger, but tied to cryptographic addresses rather than actual identities. Tracking down the individuals behind these addresses is a formidable task, often involving collaboration between law enforcement agencies, blockchain analytics firms and exchanges.

How to spot and avoid Bitcoin scams

Here are some tips to protect yourself and your Bitcoin stash:

Research and Verification: Before investing or transacting in Bitcoin, thoroughly research the platform, service or individual you are dealing with. Verify their credentials, check for reviews and seek recommendations from trusted sources.

Too good to be true: Be skeptical of offers that promise guaranteed high returns with minimal risk. If it sounds too good to be true, it probably is.

Secure Wallets: Use trusted cryptocurrency wallets with strong security features. Avoid sharing private keys or wallet recovery phrases with anyone, and store them in a safe, offline location.

Phishing Awareness: Be wary of phishing emails, websites or social media accounts impersonating legitimate crypto services. Always check URLs and verify the authenticity of the communication.

Cold Storage: Consider using cold storage options such as hardware wallets for long-term Bitcoin holdings. It is less vulnerable to online threats.

Trust your gut: If something feels off or too risky, trust your instincts and refrain from proceeding.

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