How to Spot a Cryptocurrency Ponzi Scheme

Published on: September 5, 2023
Last Updated: September 5, 2023

How to Spot a Cryptocurrency Ponzi Scheme

Published on: September 5, 2023
Last Updated: September 5, 2023

In the early days, cryptocurrencies received a lot of flak from people who doubted its potentials. They mostly did this because they could not understand how cryptocurrencies could offer many advantages over fiat without any regulations applicable to banks and fiat.

Many of these naysayers have now become converted devotees of cryptocurrencies who enjoy trading different coin pairs, including quant crypto. They are now the ones evangelizing and spreading the word about the potential of crypto. Cryptocurrencies have come a long way and still have a bright future ahead. Right now, the possibilities seem limitless, and with more research and education, even more, amazing benefits of cryptocurrencies will ensue.

While there are a lot of cryptocurrency investment opportunities available, the fundamental rule to cryptocurrency investment remains – investing with care. Why is investing with care important to cryptocurrency investments? Let’s find out.

Investing in Crypto With Care

Currently, the biggest disservice to cryptocurrency investments are different scams. The global cryptocurrency community ranging from exchanges to crypto traders and crypto enthusiasts are doing a great deal of work to curb these scams. Still, they continue to exist in different forms.

Anti-cryptocurrency establishments usually bank on these scams to dissuade people from jumping on the cryptocurrency side. They usually lace scam stories with anecdotes that inherently spread danger about cryptocurrencies. This continues to put a dent in the many benefits of cryptocurrencies.

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Over time, the commitment of the global cryptocurrency community to education, investigation, and warning has brought down a lot of cryptocurrency scams. Still, these scams usually evolve and look to take advantage of gullible people, especially newbies in the cryptocurrency space.

One of the ways these cryptocurrency scams are present is via Ponzi schemes. One of the reasons you should always exercise care before investing in any cryptocurrency investment is that these cryptocurrency Ponzi schemes disguise in many ways to conceal their deceptive intentions.

What Are Cryptocurrency Ponzi Schemes?

A cryptocurrency Ponzi scheme is any investment that promises high returns to investors with assurances of little or no risks to the investors. Usually, cryptocurrency Ponzi schemes adopt cryptocurrencies because they are easy to make payments, and there are fewer restrictions to accessing the money. Still, the truth is they are not investments. They are Ponzi schemes looking to take advantage of the vast cryptocurrency network.

The cryptocurrency market is a very volatile market subject to different market forces. Any good cryptocurrency investments come with attendant high risks, although the high risks also guarantee high returns.

Cryptocurrency traders and investors learn how to mitigate these risks over time, but when some cryptocurrency Ponzi investments offer high returns with no risks for the rewards, then that is a big red flag that suggests the imminent failure of the investment within a short period.

Choosing to partake in a cryptocurrency Ponzi investment is similar to attempting to build an edifice on sand without a strong foundation, i.e., use case, market cap, credible team, etc., and all the other essential factors that contribute to a solid crypto project. No matter how beautiful you adorn the exterior of the building on a weak foundation, and no matter the extent of interior decoration, one day, the wind will send it crashing and bring it all down.

No matter how promising a cryptocurrency Ponzi investment looks, it is bound to fail. Sadly, even the creators of such cryptocurrency Ponzi schemes do not know the exact time it would fail.

They just ride their luck and hope that more people join and commit their monies. They would hope that new clients continue to invest their cash in sustaining the Ponzi scheme. Still, surely, it will get maxed out at some point, and they will no longer be able to pay investors.

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It is unfortunate to see anti-cryptocurrency crusaders take advantage of these Ponzi schemes to malign real cryptocurrency investments. A solid cryptocurrency project can never operate like a Ponzi scheme. People fall for these Ponzi schemes because they do not know how to identify them from a mile away. We will discuss some tips for identifying cryptocurrency Ponzi schemes.

Tips for Identifying Cryptocurrency Ponzi Schemes

We don’t want you to fall prey to these Ponzi schemes. This is why we are sharing these tips with you.

A typical cryptocurrency Ponzi scheme will:

  • Claim that their investment is not affected by market forces: They may claim to use sophisticated technology to ensure that investments always yield profits.
  • Not have any viable product that they are selling: They will only make bogus claims on trading some unknown commodity with deposits made by investors.
  • Claim that their investment models, systems, and activities are complex.
  • Not have any solid use case: They will only reel out promises upon promises to guarantee that they are a legitimate investment.
  • Not present any transparent documents or vital documents such as ICO whitepapers, business registration documents, etc.
  • Never attempt to educate prospective investors about details surrounding the investment processes.


Cryptocurrency Ponzi schemes may appear in different ways as they always try to appear legitimate. The tips above should help you ask crucial questions about any investment advertised to you. Ponzi schemes hiding behind the guise of cryptocurrency investments are evil. They typically leave their “investors” with nothing in the long run, especially since transactions on most cryptocurrency networks cannot be reversed or traced.

Please do not fall prey to them. Happy investing!

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Written by Allison Langstone

Allison produces content for a business SAAS but also contributes to EarthWeb frequently, using her knowledge of both business and technology to bring a unique angle to the site.