Bitcoin is the most well-known and valuable cryptocurrency – a type of digital asset that operates independently of banks and governments. It has attracted a great deal of attention in recent years for its rapid price surges.
Bitcoin is a uniquely accessible investment opportunity that can offer significant returns even to smaller or less experienced investors. However, Bitcoin is technically complex and largely unregulated, making it a prime target for scammers.
In this post, we’ll explain what Bitcoin is and how it’s used, as well as helping you identify the most common Bitcoin scams.
What is Cryptocurrency?
Cryptocurrencies are digital assets that are stored electronically and are not controlled by governments or financial institutions. Instead, they use advanced cryptography to verify transactions and prevent theft.
Cryptocurrencies are typically:
- Decentralised. Cryptocurrencies are not owned or managed by a central authority. Instead, they use a type of distributed ledger called blockchain to register transactions and maintain the integrity of the system.
- Peer-to-peer. Crypto transactions usually take place directly between two individuals without the need for an intermediary to approve or process them. For this reason, crypto is often compared to a form of digital cash.
- Accessible. Buying or selling crypto only requires an internet connection. This makes it substantially easier for new investors to enter the market compared to more traditional investment strategies.
- Volatile. Cryptocurrencies tend to have larger and more rapid fluctuations in price than other assets. For this reason, they are highly speculative assets that can generate rapid returns but also pose the risk of significant losses.
- Fractionalisable. Most cryptocurrencies can be bought and sold in fractional divisions – for instance, you can buy 0.00001 Bitcoin. This makes it easier for smaller-scale investors to add Bitcoin to their portfolios.
Nevertheless, the growth of cryptocurrencies has not been without controversy. Due to their unregulated nature, cryptocurrencies have been widely exploited by organised crime groups. As we’ll explain below, it has also led to a large number of scams, often targeting young people or those with less investment experience.
Bitcoin
Launched in 2009, Bitcoin was the first cryptocurrency and remains both the most popular and the most valuable. In late 2024, the price of Bitcoin surged past the $100,000 mark – up from just $10,000 in mid-2019.
Bitcoin’s eye-catching gains have driven both awareness and ownership of Bitcoin in the UK. According to research by the FCA, over half of crypto owners in the UK own Bitcoin.
How is Cryptocurrency Used?
Cryptocurrencies are essentially a virtual equivalent to other forms of money. On this basis, they can be used for many of the same things as conventional money, albeit with some restrictions. This includes:
- Paying for goods and services. Unlike sterling, Bitcoin and other cryptocurrencies are not legal tender in the UK. This means businesses do not need to accept them as payment. However, some businesses do now accept cryptocurrencies as direct payment, while others allow you to purchase gift cards using Bitcoin.
- As an investment tool. Bitcoin’s rapid gains in recent years have made it extremely attractive as an investment opportunity, especially as there is no need for you to work with a broker or other intermediary. There are now a range of user-friendly cryptocurrency exchanges that facilitate buying and selling Bitcoin.
- Lending and borrowing. Many cryptocurrency exchanges also enable you to lend and borrow cryptocurrencies. This can be a great source of passive income for lenders who want to earn interest on their crypto holdings.
However, all these uses come with some risks. While Bitcoin transactions are highly secure, the lack of regulation in the crypto space means there are few legal protections. This has made cryptocurrencies the ideal target for scammers.
If you’re considering investing in Bitcoin, it’s essential you can spot if you’re being scammed – and know what steps to take.
The Most Common Bitcoin Scams
Phishing Scams
Phishing scams are highly common in the crypto world. The scammer will send you an email pretending to be a well-known crypto company or even a government agency. The email will include a link to a fake website which asks you to input your private key – essentially the crypto version of a password.
Once the scammer has your private key, they have unfettered access to your cryptocurrency. They can transfer it to their own accounts or cash it out as they choose. And because of the decentralised nature of Bitcoin, you have very few options to get it back. There’s no way to reset your private key and nobody can revoke access to your account.
Investment Scams
Given the surging value of Bitcoin and other cryptocurrencies in recent years, it’s no surprise that scammers make extensive use of fake investment schemes. Bitcoin investment scams will usually promise outsized returns from a small initial investment and encourage you to act fast so you don’t lose out.
The scammer will usually direct you to a fake investment app or platform and encourage you to transfer your crypto. Once you’ve done so, they may initially claim your investment is performing well, convincing you to invest more money. Eventually, the platform will be taken offline and the scammer will disappear – taking your crypto with them.
Pig Butchering Scams
A pig butchering scam combines an investment scam with a romance scam. Instead of simply advertising an exciting investment opportunity, the scammer will connect with you on social media or a dating site and build an intimate relationship using a fake persona.
Gradually, the scammer will start to mention their interest in crypto, before revealing they have inside knowledge of an exciting investment opportunity – a fake one, of course. From there, they will follow the same process as the investment scam, but with the added influence of a romantic attachment.
For a full overview of how this scam works and how to spot it, read our in-depth guide to pig butchering scams.
How to Avoid a Bitcoin Scam: 6 Steps to Follow
- Do your research. Before you invest in Bitcoin or any other cryptocurrency, take your time to find out everything you can. Don’t take someone’s word for it, no matter how trustworthy they seem – find reputable sources and seek expert advice.
- Be wary of urgency. If you feel pressure to invest quickly, you are at risk of being scammed. No legitimate investment opportunity would discourage you from taking time to think through your options and consult with others.
- Use trusted platforms. If you’re recommended a cryptocurrency exchange or investment platform that you’re not familiar with, be wary. It’s significantly safer to rely on popular, well-respected platforms with a large number of users.
- Protect your private keys. If someone else has access to your private keys, they have access to your crypto. You should never share them with anyone under any circumstances – and no reputable company will ever ask for them.
- Stay informed. New scams are emerging constantly in the crypto space. Check crypto news sources regularly to make sure you can spot the warning signs.
- If in doubt, steer clear. The crypto world is changing rapidly and it can feel hard to keep up. If you encounter an investment opportunity that you don’t fully understand or that seems too good to be true, err on the side of caution.
How You Can Recover Your Stolen Bitcoin
A Bitcoin scam can be devastating for the victim. It’s not just a question of the immediate financial losses – it can also lead to mental health challenges and long-term debt issues.
However, a lack of regulatory oversight in the crypto industry doesn’t mean there’s no chance of recouping your losses. With the support of an experienced crypto fraud recovery solicitor, you may be able to seek recompense and bring those responsible to justice.
Here at CEL Solicitors, we use advanced tracking tools to trace your stolen crypto. Our sophisticated crypto investigation reports are produced in collaboration with industry pioneer Chainalysis. By helping you identify where your crypto assets went and locating “cash-out points”, we’ll help guide any law enforcement investigations.
To start your crypto fraud recovery journey, call us today on 0330 822 3755 or fill out our online form.
