“Since 2021, Bitcoin’s price has risen from tens of thousands of dollars to nearly $70,000, then fallen by more than half in a short time.”
This extreme volatility has made cryptocurrency a focal point for investors and also a tool for fraudsters. From issuing “air coins” to “mining” scams, from fake trading platforms to impersonating exchanges, traps in the cryptocurrency field emerge in an endless stream. According to data from China’s Ministry of Public Security, in 2025 cryptocurrency fraud cases involved over 50 billion yuan, with victims across the country. This article comprehensively analyzes risks and traps in cryptocurrency investment to help you stay clear-headed in this emerging yet complex field.
1. Basic Risks of Cryptocurrency Investment
1. Extreme Price Volatility Risk
Cryptocurrency price volatility far exceeds traditional financial products. For example, Bitcoin within 2021 rose from about $30,000 to nearly $70,000, then fell to about $16,000 in 2022, a decline exceeding 75%. This extreme volatility means that even if you bought the right标的, you may suffer huge losses in the short term.
Case Analysis: In November 2021, Mr. Zhang from Beijing bought 100,000 yuan worth of Bitcoin at about $68,000. Two months later, Bitcoin fell to about $40,000, and he lost nearly 40%. If he continued holding until November 2022, his loss exceeded 75%. Zhang’s experience shows cryptocurrency investment requires strong risk tolerance and preparation for long-term holding.
2. Policy Uncertainty Risk
Currently, various countries have vastly different and still-evolving regulatory policies on cryptocurrency. The People’s Bank of China and other departments’ “Notice on Further Preventing and Handling Virtual Currency Trading and Speculation Risk” explicitly states that virtual currency-related business activities constitute illegal financial activities, and overseas virtual currency exchanges providing services to Chinese residents through the internet also constitute illegal financial activities. This means that in China, participating in trading on overseas cryptocurrency exchanges carries legal risks.
3. Technical Risk
Cryptocurrency is based on blockchain technology, theoretically with security, transparency, and immutability. However, cryptocurrency storage and trading rely on digital wallets and exchanges, which may have technical vulnerabilities. Hacker attacks, wallet hacks, and exchange attacks occur occasionally, bringing losses to investors.
Case: In 2022, FTX, one of the world’s largest cryptocurrency exchanges, suddenly declared bankruptcy, with billions of dollars in user assets unable to be withdrawn. Many investors suffered heavy losses, including individuals who invested their life savings.
2. Common Cryptocurrency Investment Traps
1. Air Coins and ICO Traps
ICO (Initial Coin Offering) is a method of raising funds by issuing new tokens. Criminals take advantage of ICO’s convenience to issue “air coins” with no actual value, harvesting investors through false publicity and price manipulation.
Identifying Features:
- Project whitepaper content is empty, unable to clarify actual application scenarios
- Team information is vague or anonymous
- Promise “hundred-fold returns,” “get-rich-quick opportunities”
- Tokens can only be traded on platforms built by the scammers themselves
Real Case: In 2023, a project called “某明星币” was heavily promoted on social media, claiming collaboration with a well-known star, with token price expected to “rise 100 times” within a year. Many fans and investors bought in; the token’s price skyrocketed after launch then quickly plummeted, the project party immediately sold off and cashed out, leaving numerous investors with total losses.
2. Fake Exchanges and Phishing Traps
Scammers build fake cryptocurrency exchanges, attracting investors to deposit funds with high-fidelity interfaces and false data. Once investors transfer cryptocurrency to the platform, scammers close the platform or refuse withdrawals.
Identification Methods:
- Domain name is similar to but slightly different from legitimate exchanges
- Official website cannot be accessed or frequently has errors
- Customer service responds slowly or has bad attitude
- Cannot provide registration qualification documents
Case: Shenzhen Mr. Chen received an invitation to a “cryptocurrency exchange group” on social media; there was a “teacher” sharing “insider information” and recommending a “new exchange.” Mr. Chen registered on the platform and transferred 2 Bitcoin for “investment.” A week later, he found the platform couldn’t log in, customer service disappeared, and his 2 Bitcoin (about 400,000 yuan) was completely lost.
3. Mining Scams
Scammers use “cloud mining” or “mining machine hosting” as a cover, claiming that purchasing their miners or computing power will yield stable mining returns. In reality, these so-called miners don’t exist at all, or the coins mined are worthless.
Real Case: A company placed ads on major platforms, claiming “cloud mining, 2% daily return rate,” with minimum investment of 5,000 yuan. Many investors were attracted by high returns and invested funds. Later they discovered the so-called mining returns couldn’t be withdrawn at all; ultimately the platform closed, and investors’ principal couldn’t be recovered.
4. Quantitative Trading Robot Scams
Scammers claim to have developed “AI quantitative trading robots” that can automatically trade and make money, promising “stable profits” and “1% daily earnings.” Investors transfer cryptocurrency to designated accounts but find their accounts suffer serious losses or funds cannot be withdrawn.
Case: Shanghai Ms. Wang saw an ad for “cryptocurrency trading robot” on social media, claiming to help users auto-trade with 300% annualized returns. Ms. Wang invested 50,000 yuan; for the first few days, there were indeed “earnings” credited. The platform showed her account had already profited 30%. When she wanted to withdraw, the other party used “need to pay income tax” as an excuse to demand another 20,000 yuan. Ms. Wang realized this might be a scam, chose to report to police, but had already lost 50,000 yuan.
5. Cryptocurrency Arbitrage Scams
Scammers claim they can earn stable returns through “arbitrage” (buying and selling cryptocurrency across different exchanges). In reality, this is just a传销 scam, using new investors’ money to pay “returns” to old investors, ultimately collapsing.
3. Cryptocurrency传销 Traps
1. Nature of传销
Cryptocurrency传销 is a variant of traditional传销, with core characteristics:
- Requires bringing in downlines to earn returns (referral rewards)
- Multi-level organizational structure
- Pays upper-level returns with lower-level money
- No actual products or services at all
2. Common Patterns
- 模式币: In the name of “blockchain project,” requires developing downlines to earn token rewards
- 节点投资: Claims investing a certain amount can become a “node” and receive high returns
- 矿机认购: After subscribing to miners, needs to continuously develop downlines to earn returns
3. Real Case
A project used “blockchain + social e-commerce” as a concept, claiming users who invest to become “nodes” can receive platform tokens and trading fees from downline members. Multi-level senior members’ false promotions of living in villas and driving luxury cars circulated on social media, attracting large numbers of people to join. Ultimately, the platform collapsed, the founder ran away with the money, hundreds of thousands were deceived, with amounts involved exceeding 1 billion yuan.
4. How to Identify Cryptocurrency Traps
1. Be Wary of High-Return Promises
Any promise of “high returns,” “stable profits,” or “principal guaranteed” cryptocurrency investments are scams. Legitimate investments always have risks; there is no “risk-free, high-return” investment.
Reference Standards:
- Promising daily returns exceeding 1% → basically a scam
- Promising annualized returns exceeding 100% → definitely a scam
- Promising “zero risk” or “principal guaranteed” → definitely a scam
2. Verify Project Authenticity
Before investing in any cryptocurrency project, please:
- Carefully read the whitepaper; see if it clearly explains technical implementation and application scenarios
- Search for project team information; see if there are publicly verifiable real identities
- Check if code is open source (GitHub)
- Learn other investors’ evaluations in professional communities (forums, Telegram groups)
3. Choose Legitimate Channels
Currently in China, cryptocurrency-related business activities constitute illegal financial activities. If you’re interested in cryptocurrency, you should:
- Understand relevant laws and regulations; be aware of policy risks
- Don’t participate in activities illegal in China like ICO
- Don’t believe services from “overseas exchanges”
4. Protect Personal Assets
- Don’t transfer cryptocurrency to unfamiliar addresses
- Use hardware wallets to store large assets
- Be wary of any requests to provide private keys or mnemonic phrases
- Enable two-factor authentication on exchanges
5. What to Do If Already Scammed
Stop loss immediately: If you discover it’s a scam, stop adding funds immediately.
Preserve evidence: Keep all chat records, transfer records, platform screenshots, and other evidence.
Report to police: Report to local public security organs; provide complete evidence.
Don’t believe “rights protection” institutions: Some fraudsters claim to help recover losses; these are actually secondary scams. Legitimate rights protection can only proceed through public security and judicial channels.
6. Rational Attitude Toward Cryptocurrency Investment
1. Invest Within Means
Cryptocurrency is a high-risk asset; investment amounts should not exceed what you can afford to lose. It’s recommended to control cryptocurrency investment at a low proportion of your total investments.
2. Long-term Perspective
If you decide to invest in cryptocurrency, be prepared for long-term holding; don’t try to “short-term trade,” because volatility is too large, easily leading to wrong decisions in panic.
3. Continuous Learning
The cryptocurrency field evolves rapidly; you need to continuously learn new technologies and trends to improve your ability to discern.
4. Diversify Risks
Don’t invest all funds in a single cryptocurrency or project; do asset allocation.
Conclusion
Cryptocurrency is a field full of opportunities but also hides risks. As ordinary investors, we need to stay rational, be wary of high-return traps, understand policy risks, and protect personal assets. Remember: in the cryptocurrency world, there is no “risk-free, high-return,” no “principal guaranteed, high returns,” and anything sounding too good to be true requires double vigilance. We hope this article helps you better understand cryptocurrency investment risks and avoid being victims of fraud. If you find this useful, please share it with more people, letting everyone stay away from traps together.
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