You may have seen, or will see advertisements for something called a “Bitcoin HYIP”. The pitch will usually include a promise to make a significant return on your Bitcoin in a short amount of time – potentially from people (claiming to be) currently investing in the program. But should they be trusted?
We’re going to break down what a Bitcoin HYIP is, and whether they are legitimate options for Bitcoin investors.
HYIP stands for High-Yield Investment Program. They have been around for a long time, and are not anything new to Bitcoin or cryptocurrency.
A HYIP is essentially a Ponzi scheme – more often than not, a scam. It involves paying returns to earlier investors with money invested by new investors. As a result, some do walk away with a positive return, if they get in early enough. However, it’s not a sustainable model. Once new investors stop coming on, the cash flow stops, often leaving a large number with significant losses.
To generate a high return, HYIPs often involve investors’ money put into high-risk ventures, such as day-trading stocks or bonds, or sports betting. A Bitcoin HYIP can work the same, except with Bitcoin or another crypto as the investment currency. Those running HYIPs are looking to benefit from an increased willingness to invest from crypto holders, as well as the cross-border payments enabled by cryptocurrency.
One common variation of the traditional HYIP in crypto is investing in a “mining pool”. The idea of this is to put money towards a cryptocurrency mining operation, with the mining rewards paid out to members. Often times these are fronts for a Ponzi scheme, though in some cases they can be real.
It’s tough to say if all Bitcoin HYIPs are real or fake, as they need to be taken on a case-by-case basis. The majority of HYIPs are essentially scams, though. Crypto’s penchant for attracting scammers and get-rich-quick schemes makes it perfect for those operating these schemes.
There are certainly some programs out there with a real investment plan, such as funding a mining operation. On face value, it can be hard to differentiate between a legitimate HYIP and a clear scam. It also bears mentioning, any Bitcoin HYIP is also reliant on the stability of the crypto market itself. Investing in cryptocurrency is a risk in of itself, so putting your money into a high-yield investment is twice as dangerous. Any money put into these programs should be money you are prepared to lose.
With any investment in cryptocurrency, it’s important to do your own thorough research. Because of the increased risk of a HYIP, it’s even more vital. If you fail to do your due diligence on an investment, you could find yourself falling victim to a scam, or simply a poorly run program.
Find as much material as you can on a program before investing. It’s easy to set up a website that looks legitimate, with fake testimonials too. If you can’t find any independent information anywhere else, be extremely cautious about investing. Likewise, look out for red flags on the website. Poor spelling, inconsistent information, or anything that looks like it has been quickly and cheaply put together should be cause for concern.
Scam investments will often advertise extremely attractive returns, which are too good to be true. They hope the promise of a large, quick, risk-free return will pull the wool over peoples’ eyes, and encourage investment without proper research. Be very careful about these claims. If a scheme promises returns as large as 5%, 10% (or more) per day, it’s unlikely to be legitimate. A real program is realistic about the risks and potential returns. Anything legitimate will likely offer 1% daily returns at the most.
Often you’ll find people advertising HYIPs to cold leads, such as through cold emails or on social media. Those reaching out will claim they made high returns themselves, and insist you can do so as well. Anything like this should be a significant warning sign. Never take someone’s word easily, and conduct your own research before making a decision. If someone tries to deflect when you probe for more info, walk away.
As the old saying goes – if it sounds too good to be true, it is. Be careful of schemes which promise a large return in a short amount of time, as “get rich quick” offers will always contain a large degree of risk.
HYIPs should be treated similarly to ICOs, or anything else in crypto. It’s imperative to do your own research, and if you expect to double your money in a month, know you can lose it all just as quick.