How to Identify a Bitcoin or Ethereum Cloud Mining Scam

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How to Identify a Bitcoin or Ethereum Cloud Mining Scam

Many providers are offering a chance to cloud mine Bitcoin. This is an essential alternative to mining with which an investor owns the equipment used for mining. Mining with your purchased equipment has become too expensive and too complex, and investors are turning towards cloud mining instead.

This has led to some Bitcoin mining sites claiming they can provide you with more profit than they actually can. In some cases, there is outright fraud, after which investors end up without profits. However, there are ways to avoid these and work with reputable providers only.

Do The Research Beforehand

Online reviews can help you decide based on the experience of others who have used this service before. For example, you can choose between bitcoin mining sites found on Truely by going through their reviews and comparing and contrasting the services.

This is a key part of the process of avoiding scams. If others have marked a certain provider as a fraud, chances are there’s a reason for it, and you should stay clear of such a site.

Promising Profits

Some providers promise profit if you use their services to mine bitcoin using a cloud structure. That’s usually a bad sign since no one can promise you how much the coins will be worth when you sell them. The cloud mining provider can only offer coins and the speed with which they are mined.

In the long run, when we look at the last five years, the value of Bitcoin has grown, and therefore, it’s safe to say that this is an excellent investment to make, but no one can promise you how the market will unfold.

Not Telling You What Kind of Equipment They’re Using

When using the services of cloud-based Bitcoin mining sites, you don’t get to choose the equipment that they will use. The providers can only do that, and the investor only gets to choose the provider that they find to be trustworthy.

That’s why the provider must be open and honest about the equipment and the team that maintains it. If they don’t provide this information, you shouldn’t try to purchase their services. That’s the info you need to make your call, and working without it means something is shady.

Personal Data Shared with the Provider

To set up an account for cloud mining, you’ll need to provide personal data. This includes your email, bank account, and e-wallet on which you can transfer the crypto coins once they are mined.

It’s important to know whether the provider will share this data with a third party. Unfortunately, that’s what often happens in online advertising. In the best scenario, it’s annoying and, at worst, an invasion of privacy.

Tax-Related Promises

Some bitcoin mining sites promise that investing in their mining operation means you’ll be sheltered from your tax obligations. At first, one of the things that attracted investors to Bitcoin was that it wasn’t taxed the way traditional fiat currency was. However, this is no longer the case.

Many governments are starting to track and tax the profits gained from cryptocurrency. This is also something a cloud mining provider can’t promise since it’s beyond their control. However, the chances are that taxation will become more common now when Bitcoin is a part of mainstream finance.

The Ability to Sell the Contract

This isn’t a scam but a piece of important information, and if the provider doesn’t offer that information to investors before they sign up, it may be considered a fraud. In addition, you need to know if you can sell the contract to another user if you don’t feel satisfied with it.

Many providers don’t allow you to sell the contract, and that’s a better way to go than being vague about what kind of options you have down the line. Therefore, honesty and transparency are the most essential features in a cloud mining provider.

Some Risks Are to Be Expected

There are always risks involved in cloud mining Bitcoin and Ethereum. When you get the coins you’ve mined, there’s no way to know their value when they are sold. The value of cryptocurrencies has dipped and risen a few times by now.

However, when you take the long view of things, the value of Bitcoin has grown over 8 times in the past five years. So it’s a safe bet to take as much as a bet can be safe when investing in cryptocurrencies and financial products in general. However, you should know that nothing is certain.

How to Identify a Bitcoin or Ethereum Cloud Mining Scam
Brian Wallace

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