The popularity of bitcoin has grown exponentially over the last few years. That popularity has led to a surge in bitcoin scams.
One particular type of scam has become particularly common in the bitcoin community. It’s called a High Yield Investment Program (HYIP) scam, also known as a doubler scam or simply an investment scheme.
Whatever you call it, bitcoin HYIPs are big business. Scammers are attracting millions of dollars from gullible investors. Investors are lured with promises of enormous returns – sometimes as high as 5% to 10% per day. In reality, the vast majority of investors will lose everything.
- 1 What Is A Bitcoin HYIP?
- 1.1 How Bitcoin Has Made HYIP Investment Schemes More Popular
- 1.1.1 Bitcoin Is More Anonymous Than Fiat Currencies
- 1.1.2 Bitcoin Can Be Sent Over The Internet Very Quickly
- 1.1.3 People Have Heard About Insane Bitcoin ROIs, And Now They Want A Slice
- 1.1.4 Everybody Wants To Get Rich With No Work, Skills, Or Experience Required
- 1.1.5 It’s Easy To Launch A Digital Token Online
- 1.1 How Bitcoin Has Made HYIP Investment Schemes More Popular
- 2 How Bitcoin HYIPs Work
- 3 If You Decide, How to Choose a Legit HYIP
- 4 Common Traits Of Bitcoin Investment Schemes
- 5 Bitcoin HYIP Conclusion
How do bitcoin investment schemes work? What is an HYIP? Today, we’re explaining everything you need to know about the truth behind bitcoin’s latest annoying investment scam.
What Is A Bitcoin HYIP?
A High Yield Investment Program, or HYIP, is an investment scheme that’s existed for decades. You may know it by another term: a Ponzi scheme.
The Ponzi scheme was invented by Charles Ponzi in the 1920s. Charles became notorious for using the technique throughout the decade. However, historians have spotted similar scams dating back to the 19th century.
HYIP or Ponzi schemes can be run by individuals – like Charles Ponzi or Bernie Madoff – or corporations.
A Ponzi scheme or HYIP is a type of fraudulent investment where the operator generates returns based on the revenue paid by new investors. Instead of investing in legitimate enterprises – like stocks, commodities, or growing companies – the operator keeps cycling money until the scheme collapses.
These types of investment schemes are a great money making strategy: you can make a lot of money with a good Ponzi scheme. Charles Ponzi’s original scheme paid enormous dividends to himself and early investors.
Of course, the problem with HYIP schemes or Ponzi schemes is that they’re built to collapse. These schemes rely on a constant flow of new clients. The investments of new clients pay for the returns of old clients. Then, the scheme reaches a point where no new clients are recruited, and the scheme collapses.
How Bitcoin Has Made HYIP Investment Schemes More Popular
Scam artists will always take advantage of new technologies.
The internet and email made it easier for a scam artist to contact millions of people in seconds. Now, with bitcoin, we’re seeing a similar surge in investment schemes. Here are some of the reasons why bitcoin HYIPs are extra popular today:
Bitcoin Is More Anonymous Than Fiat Currencies
Bitcoin can be exchanged over the internet with nothing more than a single wallet address. There’s no need to meet someone face to face. You don’t need to know any contact information – like an email address, a phone number, or a bank account number. You don’t even need to know the person’s name. Scam artists thrive on anonymity.
Bitcoin Can Be Sent Over The Internet Very Quickly
Bitcoin and other digital currencies are borderless and frictionless. They have low transaction fees and can be sent worldwide in seconds. You can send $100,000 bitcoin for a few dollars. Scam artists can target victims from anywhere in the world.
People Have Heard About Insane Bitcoin ROIs, And Now They Want A Slice
We’re all jealous of the people who bought bitcoin for a dollar back in 2009. You can find stories online of teenagers living in their parents’ basement who became millionaires when they discovered an old hard drive filled with bitcoin. People have genuinely made 5000%+ returns from bitcoin and other cryptocurrencies. Scam artists know people have heard of these stories. So when someone sees a huge ROI advertised by a scam artist, they’re tempted to believe it’s real.
Everybody Wants To Get Rich With No Work, Skills, Or Experience Required
Do you want to be a millionaire? Of course, you do. Scam artists tempt people with easy money. Someone who held bitcoin for 5 years and watched it grow 5000% didn’t necessarily have skills, experience, or hard work – so why can’t you get a piece of the action?
It’s Easy To Launch A Digital Token Online
There are 900+ altcoins in the world today. That number is growing constantly. Some of these digital currencies rise and fall by triple-digit percentage points on a weekly basis. Scam artists often launch their own digital token and sell it for $1 or $2, claiming it’s going to be “the next bitcoin.” They’ll tell you that you missed the rise of bitcoin – but you don’t have to miss the rise of “the next big thing”. The scam token is only $1 or $2 today. You figure it’s a no-risk investment since bitcoin is now worth over $4,000. In reality, it’s another scam.
Ultimately, bitcoin and other cryptocurrencies have led to thousands of online investment schemes over the past few years.
How Bitcoin HYIPs Work
We’ve reviewed dozens of bitcoin HYIPs and investment schemes. We’ve noticed they all work in a similar way. Here’s the basic process:
Step 1) A website appears on the internet one day. That website promises to give you “financial freedom” with no hard work, skills, or experience required.
Step 2) The website is offering one or more “investment packages”. All you need to do is give the company some money, and they’ll magically turn it into more money. Scam artists love to advertise daily or even hourly ROIs. An ROI of 1% may not seem that high – but it adds up to 3778% annual percentage yield with daily compounding interest. Nobody can guarantee a return that high.
Step 3) You sign up for the website and deposit money.
Step 4) The website takes your money and adds it to the scheme. They may claim to use it for “automated trading”. Others claim to use it for “arbitrage”. And some companies claim to spend it on advertising.
Step 5) You may be able to watch money accumulate in your account over a few hours or days. Sometimes, you’ll be able to withdraw a small amount. In other cases, you’ll need to wait a little while – like between 14 and 60 days – to withdraw your money.
Step 6) While you’re waiting for your money to magically turn into more money. The scheme will encourage you to refer new members to the platform. They may pay affiliate referrals between 5% and 20%, for example. You get a cut of each new member’s deposit. You’re encouraged to tell everyone you know about this great investment opportunity.
Step 7) The website suddenly disappears from the internet. The scam artist didn’t leave any contact information. You lose your entire investment along with any “returns” you thought you earned.
If You Decide, How to Choose a Legit HYIP
If you are looking to invest in a high-yield investment program (HYIP) then you should tread carefully. HYIPs are very high-risk investments that can make you lose more than your original investment. Most HYIPs are not actual investments but are instead illegal Ponzi and pyramid schemes set up for the founder’s personal benefit.
Due to the often illegal and transient nature of such schemes, most do not last longer than three to six months, with some only lasting weeks before vanishing with the investor’s money. Extreme caution should be advised before investing in any high-risk investment vehicle, especially HYIPs.
But if you’re willing to invest what money you can spare into an HYIP, the incentives they offer can be very lucrative. Some HYIPs offer high compounding interest rates that can earn you money quickly while you sleep.
So if you’re willing to roll the dice, here are some things to watch out for before investing into an HYIP project.
The appearance and feel of the website
Cybercriminals mostly won’t go the extra distance to legitimize their website if it will be taken down in the next month or so. Trusted companies, however, are cognizant of how their brands come across and ensure that every little detail is accounted for.
The age of an HYIP can also tell you a lot about how trustworthy it is. A program that has been running for 12 months with a lot of reviews is safer than a program that started yesterday.
SSL and trust seals
An SSL certificate tells you that the connection between your computer and the site is secure and encrypted. An HYIP without an SSL certificate is unprofessional at best and a red flag at worst. SSL certificates are becoming cheaper every day but they do take some time to set up and configure.
An HYIP not having an SSL is telling you they aren’t concerned about protecting your information or about the professionalism of their website.
In addition to an SSL certificate, you may also see trust seals by companies such as Komodo, Norton, and others. These seals are purchased separately and can cost hundreds of dollars per year just for the privilege of showing it. A site showing one or more of these badges should tell you that they’re ready to go the extra mile in protecting your information.
HYIP Monitors and Review Sites
One of the easiest methods of finding out if an HYIP is trusted or not is by doing a quick Google search. Unless the scheme is brand new, there should be at least a couple of reviews from people who have tried it out and reported their experiences.
Note that there’s usually nothing that stops an HYIP from suddenly disappearing. Positive reviews can also be purchased or faked in order to legitimize a site’s reputation, so take anything you read online as a half-truth at best.
Investment amount and Return on Investment (ROI)
Your bottom dollar should be the number one consideration before investing in an HYIP. You should choose a plan which offers a high enough return that warrants the risk of investing while also still being realistic and attainable.
For example, some HYIPs will offer investors a very high daily compounding return in exchange for holding their funds for a set period of time. Some platforms frame this holding period as an investment. In reality, the money is used to pay out other members and management to keep the scheme going.
You should not invest more than you are willing to lose in an HYIP or any other kind of investment.
Common Traits Of Bitcoin Investment Schemes
We’ve noticed some common traits of bitcoin investment schemes and HYIPs in 2017. Watch for some of these signs:
- Poor writing, bad grammar, horrible spelling, and another misuse of the English language (or whatever language you’re being scammed in)
- Limited information about the management team or who’s running the company
- No information about a company headquarters, office location, or business address
- Ridiculously high ROI promises, including guaranteed returns of 4% to 10% per day, every day, guaranteed
- Vague mentions of an “automated trading system”, “cryptocurrency mining operation” or other moneymaking operation without any specific details or proof
- An address in London and a legitimate UK corporation registration number listed on Companies House, a UK-based corporate registration website with lax security standards (the companies are never actually based at their listed address)
- The company refuses to disclose information about themselves, respond to emails, or communicate with you in any way
- They talk about “doubling your bitcoin” through some type of “multiplier” system
- There’s an overall lack of information about the business plan or how it works
- You find suspiciously positive reviews online when looking for more information about the scheme (this information is posted by affiliates who want to take a commission from your membership fee)
- The companies disappear after a few weeks or months on the internet
Are There Any Legitimate HYIPs?
We’d all like to make 300% returns on our investment in a week. So are there are legitimate high yield investment programs in the world of bitcoin? Can you actually get rich quick with little to no work?
Here are some things to consider:
- Many multilevel marketing companies (MLMs) blur the line between pyramid scheme, HYIP, and legitimate business; these companies are legal in many countries around the world, so you may consider them to be “legitimate” HYIPs
- Any pyramid scheme is a great moneymaking opportunity if you’re near the top of the pyramid and get out early (or, if you created the pyramid scheme yourself)
- Some bitcoin HYIPs will genuinely payout for a few hours or days; you’ll be able to withdraw your money, as new members are continuously joining because they hear a company is “paying out”
Bitcoin HYIP Conclusion
Ultimately, the vast majority of bitcoin HYIPs are blatant scams. Most investors lose their entire deposit and have no chance of taking any legal action. By paying attention to the information above, you can avoid bitcoin investment schemes and protect your hard-earned money from bitcoin scam artists.