Cryptocurrencies have grown immensely popular over recent years due to their decentralization, anonymity and lack of government regulation. While this is fantastic news for investors and traders alike, criminals and fraudsters also take advantage of unwary investors and traders looking for alternative financial systems such as cryptocurrency. Scams and fraudulent schemes are increasing in prevalence within this space; therefore it is essential that investors recognize them early to avoid being taken in by such traps.

As cryptocurrency usage expands, so too do crypto scams. According to reports, investors lost approximately $3.8 billion through various cryptocurrency scams during 2020 alone – so it is vitally important to remain aware and knowledgeable before trading cryptocurrency markets.

Below is a list of scams and fraudulent schemes to be wary of:

1. Ponzi Scheme:
A Ponzi scheme is a fraudulent investment scheme which promises unrealistically high returns to lure in investors, such as Carlo Ponzi’s scheme in the 1920s. The goal of such an investment scam is to lure as many participants as possible so that early investors are paid back using contributions from newcomers; ultimately however, when this approach fails and collapses many investors suffer severe losses.

Scammers in the crypto space frequently lure investors with promises of high returns quickly, such as offering new altcoins or tokens they claim to be. Before investing, it is vital to do an in-depth investigation on both the token and group behind it.

2. Fake giveaways:
Crypto scammers often employ fake giveaways as a method of fraud. Usually these giveaways take the form of someone advertising an apparently genuine cryptocurrency giveaway but in reality are run by fraudulent individuals or firms with no connection to any real ones; victims then are asked to contribute an amount in cryptocurrency in return for a greater return – only for them to discover later that it was all an elaborate scheme!

3. Initial Coin Offerings (ICOs):

ICOs offer an innovative means of funding projects in the crypto world. By selling tokens or coins to raise funds for developing new crypto projects, ICOs allow firms and individuals to raise capital without incurring huge costs for development. Unfortunately, not all ICOs are legitimate; many may even be scams; thus it is essential that you conduct sufficient research on both your chosen project and team before purchasing their ICO.

4. Mining Scams:
Crypto mining scams have become an increasing risk. Mining involves solving complex cryptographic puzzles to find new blocks of cryptocurrency; scammers sell mining equipment or services at premium prices with promises of high returns on investment – however in many instances these turn out to be schemes and do not yield any income-generating potential for their purchaser.

5. Malware Attacks: Hackers can use malware to gain unauthorized entry to individuals’ crypto wallets and steal their cryptocurrency holdings. Whenever downloading wallet apps or software from untrustworthy sources (websites or emails), always ensure it comes from reputable sources and only trust those you know personally for future downloads.

Crypto scams and fraudulent schemes can pose a real danger to investors and traders, so it is crucial that we remain alert at all times. A few tips for avoiding crypto scams:

1. Conduct Research: Do a background check on any investment, project or individual you plan to invest in before proceeding with anything related. Check reviews or warnings posted online via social media sites, forums and other sources before making your final decision.

2. Be wary of high returns with minimal risk: A basic rule in investing is: If it sounds too good to be true, it probably is!

3. Secure Your Crypto Wallets: Make sure that your passwords remain safe, store wallets offline or with a trusted service, and don’t share private keys with anyone.

4. Trade or purchase through only trusted exchanges: For trades or purchases to go smoothly, only trust credible exchanges to handle trades or purchases. Always double-check credentials and reputation before proceeding with trade or purchase.

Though cryptocurrency trading can be exciting and profitable, it is imperative to remain vigilant against fraudulent schemes and scams. Always do your research on any new scams or frauds occurring within the crypto universe, to help avoid becoming victims to any such schemes and enjoy all the advantages associated with crypto trading safely.

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