Along with the growth of the crypto universe and the increasing popularity of automated tools, such as trading bots, investors are always looking for ways to maximize profits efficiently, quickly, and without much effort.
These bots are programs designed to perform trades automatically, based on parameters defined by the user or certain platforms. However, not everything is rosy with this strategy: unfortunately, scams involving trading bots are also on the rise.
In this article, we will explore how investors can identify trading bot scams in the cryptocurrency market, how to avoid falling into these schemes, and what measures can be taken to protect not only their investments but also those of other investors.
What are trading bot scams?
We can define trading bot scams as the situation in which scammers create fake or ineffective trading bots to deceive investors. The bot is promoted as an automatic tool that promises high and quick returns, often with little effort required from the investor. However, instead of generating profits, these bots often generate huge losses or simply disappear with the invested money.
The idea is for this bot to make transactions for investors, observing automated patterns that would make the best possible decisions. Many automations happen today, bringing us time savings and interesting results in everyday tasks, it is true. But it is necessary to pay attention to very clear signs that such profit could be, in the end, just a scam.
Scammers may convince users to pay subscription fees or buy expensive software packages claiming that these bots have a 'guarantee' of generating profits, and falling for this is a common mistake. Another common type of scam is through bots that deliberately make bad trades, manipulating trades to deplete investors' funds. All this is done with the help of a 'dedicated' community that always seems interested in attracting more people to be 'helped' by the bot's actions.
How to identify a trading bot scam?
There are some warning signs that can help investors recognize when a trading bot could be a trap. Here are some of them:
1. Promises of guaranteed profits
No investment, whether in cryptocurrencies or any other market, can guarantee consistent or certain profits. If a bot promises guaranteed returns, it is a major red flag. Financial markets are volatile, and even the most experienced traders face losses: if that tool were really that transformative, the world's largest investors would already be using it (or talking about it).
2. Bots that do not offer transparency
If the bot does not allow you to see how it makes decisions or what parameters it relies on to make transactions, be suspicious. Legitimate tools often provide some transparency about the trading strategies used.
Bots that operate like a 'black box', without explanations, are often fraudulent. It is generally in this limbo of lack of information where the ideal gap for a scam is found.
3. Request large initial deposits
Scammers often ask users to make large deposits before starting to use the bot. They claim that these funds are necessary to activate the software or that the bot only works with large amounts.
However, this is a trick to take the investor's money all at once. It's not that it's forbidden to demand value to enter; the largest investment funds in the world also require it, but it's a matter of observing whether that request is accompanied by any real justification or just empty responses.
4. Support from celebrities or influencers
If you find bots promoted by celebrities or influencers (especially those who do not have an obvious connection to the cryptocurrency market), be careful.
Many scammers pay for these figures to promote their plans, increasing the perception of legitimacy, but in reality, this can simply be a deceptive marketing strategy, which, in many cases, the celebrities or influencers are not even aware that they are dealing with scams.
5. Unregulated platforms
Scammers prefer to operate on unregulated platforms, where it is easier to deceive users. If the platform offering the bot has no type of license or regulation, run away immediately.
Regulated platforms must follow strict standards, which better protects investors. Regulation is not a restriction on transactions, but rather a set of rules for those on both sides of the counter (those offering alternatives and those who can be investors in them).
How to avoid falling for trading bot scams?
Now that we know how scams work and what the warning signs are, it is important to understand what actions you can take to protect yourself and avoid contact with these schemes.
The following are six tips that can help investors protect themselves from trading bot scams in the crypto market:
1. Research before investing
The first and most important advice is to always do your own research (DYOR). Before trusting any bot, check reviews, comments from other users, and the reputation of the platform.
Read reviews from experienced traders and look for independent reports on how the bot works. Researching not only based on what is presented to you but also keeping an eye on those who are already investing or have invested is essential.
2. Avoid promises of guaranteed profits
As mentioned earlier, guaranteed profits are a red flag, a very strong indication that something is wrong. It is very similar to the promises made by airdrop scams: if the charity is too good, the saint must suspect!
Bots can be useful tools for automating trades, but they cannot predict the future of the market. Avoid any service that promises certain profits because, with high likelihood, it will not only not happen, but you will end up losing the invested money.
3. Be careful with expensive packages and initial fees
Legitimate bot platforms generally charge reasonable fees, and these fees are clearly stated on their websites. If you come across bots demanding exorbitant subscription fees or expensive software packages, be cautious.
Because think about it: if you are going to pay such a high amount to access something that automates transactions and seeks profits, the profits that you don't even know about will probably just disappear in fees, making that automation not even worth it.
4. Choose regulated platforms
Always choose regulated platforms or exchanges that offer trading bots. Platforms like Binance, for example, have strict security and user protection requirements. In addition, they use bots that have already been tested and approved.
It is a major red flag if you come across a platform that, in addition to not being able to find much information about how it works, is also found on an exchange that you have no idea about its reliability.
5. Check the transparency of the code
Choose bots that make their source code available for verification. This allows the community and independent developers to examine the code for traps or vulnerabilities.
Open-source bots tend to be more reliable since anyone can audit them. If you can find bots that have been externally audited, you can have even greater reliability. Also, remember to use platforms that offer security measures, such as two-factor authentication (2FA) and have strict fraud policies.
6. Beware of pyramid schemes disguised as bots
Some scammers use trading bots as a facade for pyramid schemes. If you notice that the main source of profits seems to be the entry of new participants rather than actual trading, be suspicious immediately. Pyramid schemes inevitably collapse.
A very strong indication that this bot could be a pyramid scheme is asking what the main source of returns is: if the answer is 'the entry of new investors' or they respond by just chatting and changing the subject, avoid this trap immediately.
How to report and protect other investors?
It is possible to turn a personal lemon into collective lemonade: when you identify a trading bot scam, be sure to report this scam to the exchange or platform where the bot is promoted.
Serious exchanges take these reports seriously and can remove fraudulent bots from their lists, preventing other people from also being harmed and losing money.
Another interesting way to help is to share your findings in specialized forums, such as Reddit groups or Telegram, to warn other investors about the scam.
Caution and attention prevent headaches!
Scams involving trading bots are a growing concern in the cryptocurrency market. However, if you follow the above advice and maintain a cautious attitude, you can avoid these mistakes.
Researching before investing, being wary of promises of guaranteed profits, and choosing regulated platforms are essential steps to protect your investments. And, of course, if you identify a scam, do not hesitate to alert other investors and report the case to the responsible authorities and platforms.
Do you know anyone who has experienced this complication? Tell us!
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Photo by Maxin, available on Freepik
