Is investing in crypto safe? While some cryptocurrencies have delivered significant returns in the past, this potential for profit might make it easier to overlook red flags when assessing an opportunity. However, falling victim to a scam could not only cost you financially but also take a toll on your mental wellbeing, making it crucial to recognise the warning signs.
According to the City of London Police, more than £612 million was lost to investment fraud in 2023, and many scammers are using the growing interest in cryptocurrency to entice victims.
In fact, cryptocurrency now accounts for more than 40% of all investment scam reports, making it the most common asset victims believed they were purchasing.
The financial losses from crypto scams can be significant, underscoring the importance of staying vigilant.
In a prosecution brought by the Financial Conduct Authority (FCA), two individuals were convicted in November 2024 of defrauding 65 investors out of more than £1.5 million – the equivalent of around £23,700 for each victim. The duo used cold-calling to establish contact with victims and then directed them to a professional-looking website that claimed to offer high returns in crypto.
Smaller upfront investments could be used to entice crypto scam victims
Fraudsters often ask for a small initial investment to make a crypto opportunity seem low risk. This can mislead investors to question ‘is investing in crypto safe?’ by creating a false sense of security, but even minor commitments can lead to significant losses.
Even experienced investors can fall for crypto scams due to several factors:
- Lack of understanding: Crypto remains a relatively new asset, and many people don’t fully grasp how it works. A 2023 Financial Services Compensation Scheme (FSCS) report found that while 91% of consumers had heard of cryptocurrencies, only 11% felt they understood them well. Scammers often exploit this knowledge gap to gain trust.
- Appeal of high returns: Some crypto assets have seen huge gains, making exaggerated claims from scammers seem plausible. For instance, Morgan Stanley reported in October 2024 that Bitcoin’s average annual return between 2014 and 2024 was 49%. However, investment returns are never guaranteed, and crypto prices can be highly volatile.
- Influence of advertising and social media: A 2024 FCA survey revealed that 38% of participants had come across crypto adverts, up from 27% in 2020. Social media was the most common platform, potentially creating the illusion that “everyone” is investing, which can make individuals more susceptible to scams.
With crypto scams on the rise, if you’re considering this asset, taking precautions to protect your money is essential.
Be wary of adverts promising high returns
While potential high returns can be tempting, if you spot an advert or social media post promising significant gains, be cautious. Ask yourself if the claims sound realistic. It’s also important to note that investment returns cannot be guaranteed. So, if an advert states there is no risk of losing money, it should set alarm bells ringing. As the old saying goes, “If it seems too good to be true, it probably is.”
Treat cold calls with suspicion
If you’re contacted out of the blue about an investment opportunity, approach it with caution. This is a common tactic used in crypto scams to build trust and gather information about potential victims. If you’re wondering, ‘is investing in crypto safe?’, remember that legitimate opportunities don’t involve unsolicited messages or high-pressure tactics. It’s not just phone calls or text messages to be wary of—scammers may also contact you through emails or social media.
Take Your Time Before Investing
Spotting an investment opportunity that seems promising can be exciting, but it’s essential to take your time and do thorough research before making a decision. Fraudsters often create a sense of urgency to pressure you into acting quickly. They might claim the offer is only available for a short time or that you need to act fast to secure your place before others do. The volatility of the crypto market can also be used as a scare tactic. Scammers may suggest that an asset’s value is skyrocketing and that you must invest immediately to avoid missing out. Genuine financial professionals understand the importance of careful decision-making and won’t rush you into committing on the spot.
Verify the Firm and Advisor
It’s just as important to research the firm or individual offering the investment as it is to investigate the opportunity itself. Scammers often go to great lengths to appear legitimate, using professional-looking websites and fake testimonials. Rather than taking these at face value, dig deeper to confirm their authenticity. You can check whether an individual or firm is authorised by the FCA using the Financial Services Register. Be wary of criminals impersonating legitimate companies—always use the contact details listed on the register to verify who you’re dealing with.
Don’t be afraid to seek advice
You don’t have to assess an investment opportunity alone. Discussing it with a trusted friend, family member, or independent financial planner could help you spot red flags you might have missed. Even genuine crypto investment opportunities can be high risk and might not be right for you. So, speaking to a professional could help you understand how it might fit into your wider financial plan and provide a chance to review the alternatives.
If you’d like to talk to one of our team about your finances and the steps you might take to reach your long-term goals, please get in touch.
Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
Crypto assets are not regulated financial products so please be aware that trading them carries a considerable amount of risk for your capital. Cryptocurrencies are also not covered by existing consumer protection laws.
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