Crypto Frontline

Why Do So Many People Think Bitcoin Is A Scam?

Why Do So Many People Think Bitcoin Is A Scam?
September 29
08:45 2020

While Cryptocurrency seems very promising for the future, there are currently major risks involved in using digital monetary systems (cryptocurrency). This has nothing to do with market volatility, but rather in the form of online scams. Thus, it is important to be cautious when carrying out any of these online transactions. You may end up losing your cryptocurrency investments through such scams. Since the introduction of Bitcoin, many other cryptocurrencies have arisen. Hence, it can be confusing to identify a genuine one.

The major reason people may think that Bitcoin is a scam is because of their lack of understanding of how it works. This could be due to various factors. Some people lack the knowledge or education to grasp the structural technicalities involved. Others could be skeptical of new technology especially on matters about digital currencies. It is important to be vigilant when you are indulging in any cryptocurrency transactions. There are fake websites on the internet prowling for unsuspecting cryptocurrency investors.

Here are a few reasons why many people are skeptical about Bitcoin, and tend to suspect of a Bitcoin Scam

Government Regulation Issues

Few people feel comfortable with a financial system that lacks government regulation. There has been a lot of confusion and lack of clarity on the regulatory and legal status of Bitcoin. Victims and criminals believed it was not illegal to get Bitcoin. This is because it did not have government recognition. Many people thought law enforcement was incapable of punishing perpetrators of cryptocurrency-related offense. Yet, this has changed after some high profile legal cases involving Bitcoin came to court. Only time will tell if more governments start to regulate cryptocurrency transactions.

Presence of Ponzi Schemes

Some Bitcoin platforms offer High Yield Investment Products (HYIP). They usually promise exaggerated rates of return. They are forms of online Ponzi schemes. They operate by paying back earlier investors with funds gained from newer ones. In 2012, the SEC shut down Zeek Rewards for carrying out such HYIP scams to the tune of 850 million dollars. MyCoin, a cryptocurrency operator in Hong Kong, got 8.1 million dollars from investors. Such incidences have tarnished the reputation of Bitcoin and other cryptocurrency platforms. This makes it easier for many people to assume that Bitcoin is a scam.

Nature of Transactions

In cryptocurrency, most fraud involves transactions that are illegal from the beginning. So it has become natural for users to expect some level of dishonesty and chaos when using Bitcoin. In turn, this makes it difficult to differentiate between honest operators and scammers. Additionally, victims of such scams are reluctant to cooperate with law enforcement agencies. However, with more transparency recently, it has become easier to track and prosecute scammers. The scams are no different from the ones experienced in traditional financial institutions.

The Anonymity Factor

Many people are apprehensive about using Bitcoin. This is due to the perceived anonymity and secrecy surrounding it. Yet, it is important to note that Bitcoin is not anonymous. While users are not required to provide identification information, the information is available. This is because many transactions by the same entity are traceable back to the owner.

This is achievable through the digital currency’s public ledger or fraud victims. To remain anonymous, you have to convert your cryptocurrency into goods or services. You can also change it into another currency. This is not easy without giving your identification information. In a famous case, former DEA agent, Carl Force was indicted when his Bitcoin transactrtion trail underwent examination. He faced wire fraud and money laundering charges.

Conflicting Views from Experts

Experts do not agree on whether Bitcoin is a scam or not, throwing the public into confusion. While some of them think that it is the future of online transactions, others refer to crypto as a scam. Jack Ma is the Founder and Chairman of Alibaba Group Holding. According to him, blockchain technology could change the world. Yet, he thinks Bitcoin could be a bubble. Intuit

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