Basic rules to follow to avoid Ponzi schemes in cryptocurrencies

With cryptocurrencies taking a center stage of the mainstream business press, the chance of some projects being the criminal activity, in fact, rises.

Projects like Biconnect are typical examples with investors now trying to get their money back and sue Bitconnect. But whether the money will ever come back, it's an open question.

Many people associated with cryptocurrency community had been warning of Bitconnect on the basis of Bitconnect promising investors to earn 1% per day, try to avoid it. Since the essence of the cryptocurrency market is not based upon fundamentals like the GDP, inflation or unemployment, it is very difficult to predict its price movement. Promising “sure” profits is therefore fake and unreal.

The world of cryptocurrencies is not about Bitconnect only. It is possible that dozens of fraudulent projects with Bitconnect being the only one to stand out as the most famous although it is not far ago that Bitconnect bubble burst.

Basic characteristics of Ponzi scheme in cryptocurrencies:

1. Guaranteeing high profits with very low risk. It is a common rule that if you do not want to risk too much, you can not expect a large profit. In fact, if you expect high profits, you have to be willing to accept high risk associated with your investment.
2. Problems with withdrawing money from the system. With Ponzi schemes, you may encounter various, often irrational reasons why you can not get the money you have invested or "earned".
3. It also happens to clients that they do not know what they invest into. Organizers and promoters of Ponzi schemes often explain their "business model", which is almost incomprehensible for normal people.
4. On the other hand, the payout and your earnings system are immediately clear to you. They will all explain how you earn, how much you earn, and so on. However, where all that profit comes from is unclear.
5. Another warning signal is that all Ponzi schemes are presented as almost risk-free. If you familiarize yourself with a "risk-free product", you should definitely be aware of such characteristics being too tempting to you and ideally, refrain from making investment decisions on such meetings.
6. Ponzi schemes typically award people with profits in case they bring in new people into the system or a network. Such rewards amount up to 20% of any new business you bring plus 20% of the annual profit on top of it. Bear in mind that if something sounds too good to be true, it is usually not true.