Etherium: how it works and how it differs from other cryptocurrencies

Crypto scam refers to any form of deception aimed at stealing digital assets through false promises, fake projects, or technical tricks. Scammers constantly adapt their tactics, aligning with trends, whether it’s hype around a new blockchain, the launch of a promising token, or a high-profile ICO. The high demand for earning in cryptocurrency creates fertile ground for scams – in the absence of regulation and complete transaction anonymity. Victims can lose money in a matter of minutes – with no possibility of recourse or refund. Crypto scams target both individual investors and entire startups, fund pools, and even exchanges.

Why Cryptocurrency Fraud Thrives

Blockchain provides transparency but not protection. Anonymous wallets, lack of mandatory verification, instant transfers, and decentralization create an environment where fraudsters exploit trust as their main resource. Any token launch or new protocol with high demand and low supply creates favorable conditions for cryptocurrency scams.

New projects often do not undergo legal scrutiny. Many investors send money without a real risk analysis – solely based on emotions and promises. There is no customer support, insurance, or government regulation. Crypto scams turn even advanced traders into vulnerable participants – especially when participating in presales, DeFi launches, or NFT initiatives.

Main Types of Cryptocurrency Scams: Detailed Analysis

Crypto scams can take dozens of forms. Below are the main schemes most commonly used by fraudsters.

1. Pseudo-ICO

Creators do not develop a real project but only set up a website, publish a whitepaper, and raise investments for a “future token.” After receiving funds, they disappear with investors’ wallets. A prominent example is Plexcoin: the founders raised $15 million and vanished.

2. Phishing Attacks

Fake wallet websites, exchanges, or NFT platforms mimic the appearance of originals. Users enter private keys or seed phrases, after which scammers instantly withdraw all tokens. Cryptocurrency scams often masquerade as customer support, verification, or airdrops.

3. Pump & Dump

Participants artificially create demand for a token: buy assets, generate fake news, use influencers. Once the price rises, organizers sell coins, crashing the market. Other investors are left with significantly devalued assets.

4. Liquidity Drain Scam Projects

Projects in DeFi launch a token, create a pool on a DEX, promise high returns. After reaching a critical liquidity volume, developers withdraw all funds, leaving investors with worthless tokens. The same scheme is found in play-to-earn games.

5. Financial Pyramids

Pseudo-funds promising up to 30% monthly profits use new inflows to pay previous participants. The model collapses when new inflows decrease. An example is BitConnect: over $2.6 billion was lost.

Who and How Cryptocurrency Scams Threaten: Real Investment Risks

Cryptocurrency scams threaten not only newcomers. Even experienced traders, venture funds, and startups fall victim. Investments in cryptocurrency without legal expertise, technical audits, and team reputation checks are particularly risky. Risks increase during market euphoria – with Bitcoin’s rise or hype around new blockchains.

The biggest losses are recorded among participants who invest in startups without MVP, whitepaper, or legal registration. The average loss per participant in a scam ICO in 2023 was $12,000, according to estimates based on open blockchain data.

How to Avoid Crypto Scams: Protection Methodology

Before investing, a comprehensive project check is necessary. A step-by-step approach that reduces the likelihood of losses:

1. Check the website: presence of HTTPS, text errors, spoofed domains.

2. Study the whitepaper: specificity, logic, technical details.

3. Check the team: LinkedIn, Twitter, GitHub, interviews, history.

4. Analyze smart contracts: audit from Certik, Hacken, PeckShield.

5. Check tokenomics: team’s share, issuance, lock-ups.

6. Study activity: community, Telegram, Discord, news frequency.

7. Exclude guarantees: 100% profits, fixed incomes – red flags.

8. Use cold wallets: Ledger, Trezor – for storage.

9. Participate through reputable platforms: Binance Launchpad, CoinList.

10. Monitor reactions: discussions on Reddit, BitcoinTalk, Dune.

Why Crypto Scams Persist: Psychological and Market Triggers

Hype, desire to get rich quick, FOMO – key factors that make cryptocurrency fraud widespread. Fraudsters often use success visualization, fake numbers, and counterfeit interviews with “experts.” Crypto scams intensify with growing interest in new formats – ICOs, IEOs, NFTs, DAOs. The launch of any new technology is accompanied by a wave of scams exploiting knowledge gaps. Projects that combine exchange, wallet, and investment platform functions pose a particular danger. These hybrids create the illusion of legitimacy but operate as pyramids or drain programs.

Conclusion

Crypto scams are a systemic issue but not a verdict. Deception thrives where critical thinking is lost, and anonymity replaces accountability. Investments require analysis, attention, and technical preparation. With due caution, information protection, and risk diversification, digital assets can generate income while avoiding scams.

The cryptocurrency market is not governed by the linear laws of economics. The price not only reflects the value of the asset, but also shows emotions. When the exchange rate falls, panic sets in; when it rises, euphoria ensues. This creates cycles in which FOMO, mistrust, greed and anxiety come into play. To understand where logic ends and irrationality begins, the cryptocurrency fear and greed index is useful, an aggregate metric that digitises the mood of participants and converts sentiment into a figure.

What does the cryptocurrency fear and greed index reflect?

The metric ranges from 0 to 100. Low values indicate fear, high values indicate greed. The balance between these points forms the objective market temperature. With an indicator below 20, the seller is activated; with one above 80, the buyer predominates. This gradation creates a tool with which extreme points can be identified and the moment of trend reversal can be assessed.

The cryptocurrency fear and greed index is formed on the basis of a complex analysis:

• volatility: sharp price changes over a short period;
• trading volume: activity in spot and derivatives markets;
• social media: peaks in mentions, tone of messages;
• Bitcoin dominance: BTC share relative to other assets;
• keyword search: increase in the frequency of queries;
• surveys and opinions: audience behaviour parameters.

The indicator converts abstract feelings into a concrete figure. It is not a forecast, but a reflection of the current situation. Therefore, the cryptocurrency fear and greed index is not used as a basis for trading, but as a filter for decision-making.

Psychology and momentum: how the metric works

The cryptocurrency market exhibits an exaggerated reaction to events. News about regulations, hacks, stock market listings, and bankruptcies trigger a wave of emotions. However, what matters is not the event itself, but its interpretation. The Cryptocurrency Fear and Greed Index doesn’t react to the event itself, but to the effect it has had on participants.

For example: BTC’s sharp drop from $34,000 to $28,000 in three days reduces the index from 65 to 18. This reflects a panic-driven sell-off. A week later, with no news but with the price stabilizing, the index returns to 38. This shows that fear builds quickly but gradually disappears. The metric doesn’t show the market, but its perception. This is the key to understanding sentiment. At the same time, it’s important to keep in mind that each stage requires context. An index of 25 after a drop from 90 indicates a potential entry point, but the same level after prolonged consolidation may indicate a loss of interest.

How to Use the Crypto Fear and Greed Index

The tool is not used as the basis of a strategy, but as a filtering indicator. It helps to:

• assess the market’s readiness for a correction;
• set extremes to look for entries or exits;
• reinforce signals from other indicators;
• avoid emotional trading;
• manage risk and trade timing.

With indices below 20, the probability of an upward reversal increases, and with indices above 80, the risk of a correction arises. However, mechanically following the level leads to error. It is important to consider trading volume, the trend, and the overall structure of the movement. The Crypto Fear and Greed Index is effective when used in conjunction with technical analysis.

Bitcoin Operational Example

The Bitcoin Fear and Greed Index manifests itself most strongly in high-liquidity segments. Situation: In October, the BTC price began to decline from $30,500 to $25,300. The index fell from 61 to 24. At the same time, trading volume increased, and altcoins began to outperform BTC in terms of the speed of decline.

Trader Reaction: An evaluation of candlestick formations showed absorption on the daily chart. The RSI entered oversold territory. The cryptocurrency Fear and Greed Index signaled panic. Decision: Open a long position at $25,800. Exit at $28,200 after the indicator recovered to 47. This example shows how to use the metric in a specific trading situation: not as a trigger, but as a reinforcement of the decision.

Volatility, Volume, and FOMO: Where Emotion Comes into Play

When strong growth occurs, the race for profits begins. FOMO emotion activates the unstrategized buyer. The metric shows levels of 75 to 95 at this time. At the same time, the number of new portfolios grows, searches double, and derivatives volume increases three to five times.

The Cryptocurrency Fear and Greed Index doesn’t record growth, but rather an overshoot in expectations. It’s important to monitor not only the indicator itself but also its speed. Growth from 42 to 82 in 48 hours gives a more important signal than a static value of 90. Investors who use the indicator in their system close part of their positions when there is an accelerated movement. This approach allows them to manage risk and avoid momentum traps.

Relationship between the Cryptocurrency Fear and Greed Index and Technical Analysis

The Cryptocurrency Fear and Greed Index reinforces signals when:

• a divergence appears on the RSI;
• Fibonacci levels are reached;
• trend lines are broken;
• a change in volume occurs at an extreme.

Integrating the index into your trading plan helps rule out emotionally driven trades. For example, when a strong upward breakout occurs and the indicator reaches the 85 level, an entry point does not emerge, but rather an area to lock in profits. This is especially relevant in phases of extreme euphoria, when logic is disabled.

Trading Mistakes: When Metrics Don’t Save the Day

The Cryptocurrency Fear and Greed Index does not prevent losses if:

• the position is not monitored;
• risk management is breached;
• support and resistance levels are ignored; A mechanical strategy is applied without a filter.

The incorrect use of metrics leads to premature entries or late exits. To reduce risk, it is necessary to consider market structure, seasonality, and macroeconomics. The metric is not a universal key, but rather a mood detector.

Cryptocurrency Fear and Greed Index: The Bottom Line

The cryptocurrency market is driven by behavior, not formulas. Emotions drive movement. The Crypto Fear and Greed Index turns behavior into a metric. When interpreted correctly, it helps avoid mistakes, reinforces technical analysis, and protects capital. Figures shouldn’t be blindly trusted, but rather used as a compass that indicates the direction of one’s mood. However, the value isn’t in the number itself, but in understanding what lies behind it.