Currency Basics

How to Tell If a Cryptocurrency Offering is a Ponzi Scheme



There is saying that goes by “when the deal is too good, think twice,” and the same case should apply when dealing with cryptocurrency. People have come up with ways in which they can quickly make a fortune from the amount invested in this digital currencies.

We have noticed many investments in digital currencies being introduced in many online websites program. Majority of those websites are Ponzi, HYIP, and pyramid scams. These schemes usually promise high returns on any investment in them. Also, these scams have gained a lot of traction among people, especially those who have no idea on how cryptocurrencies work.


Forms of cryptocurrency Ponzi Schemes

For Ponzi scheme to exist, there must be a bank account as well as a legal entity formed to hold deposits from interested investors. If you notice a particular company uses a physical product such as mobile phone services to pass themselves as a legit business, then be wary.



  • Posing as an altcoin

Many people are drawn to Bitcoin mostly for the allure of becoming rich so fast, and they invest without having to go through the whitepapers. These scams always advocate for a guaranteed capital appreciation.

  • Cloud mining program

You’ll find scammers renting machines or purchasing hashing power to pose as genuine cryptocurrency miners. These programs tend to promise a high return on your investment in a short period of about 1-3 months. While a legitimate cloud mining program vintages small profits, these Ponzi schemes gradually indicate considerable earnings in a short time.

  • Cryptocurrency Investment Programs

Some Ponzi goes ahead to tell you that they have come up with a secret as well as a proprietary trading arrangement where they are supposed to use your money to invest and later on give you some shares of return.



How to Identify a Cryptocurrency’s Ponzi Scheme?

Identifying a Ponzi scheme is not easy. Sometimes you can be so deep into the scam such that the only way to realize is through the collapse of the suspicious programs or schemes. Here are some traits that indicate a Ponzi scheme.

  • Massive as well as consistent returns – that do not involve any risks at all and happen in short period.
  • Returns that depend on referrals –If the only way to earn is through commissions or references, then that program is likely to be Ponzi scheme.
  • Enroll to get more info – You need to join the programs to have a view of what they are offering. Once you sign up, that’s when you see hidden features such as cloud mining and referrals tabs.
  • Non-public blockchain and closed source – It is not possible for the public to view the cryptocurrency code and the blockchain is in a private mode.
  • Only internal exchanges – Most Ponzi schemes ensure that they put up transactions that are run by the organization itself and thus it’s very prone to manipulations of fake bids and prices.
  • Bad Bitcoin website listing – check whether a particular cryptocurrency offering website is listed there. The list does not contain all Ponzi schemes, but the major ones are listed there.



Ponzi (pyramid) schemes are evident in cryptocurrencies dealings and have been around even before the existence of these digital currencies. Take your time and research before investing all your hard earned money into cryptocurrencies marketplace.


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January 2019
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