I don’t understand cryptocurrency. Are we inventing new money, creating a real Monopoly game? Here is a definition of cryptocurrency: a digital currency in which transactions are verified and records maintained by a decentralized system using cryptography, rather than a centralized authority.
He went on to say, “Decentralized cryptocurrencies such as bitcoin now provide an outlet for personal wealth that is beyond restriction and confiscation.” (At this point, I’m on the floor in the fetal position and crying.)
What happened to the money? Well, for all the kings of crypto, May hasn’t been a good month for you, with the value of crypto crashing like it has. Instead, he reminded, especially the elderly, to be wary of investing your money, your retirement as well, in such a volatile currency.
So what’s the attraction?
For scammers, there may be good reasons to use cryptocurrencies. Once something is paid for with cryptocurrency, it is almost untraceable. Now that retailers are more aware and savvy about gift card scams, scammers are looking for new ways to scam, and crypto fits the bill.
According to AARP, their Fraud Watch Helpline contacts involving Bitcoin scams have tripled. Their advice is: if a stranger or company asks you to use cryptocurrency to make a payment or transfer money, assume it’s a fraud.
According to Forbes, between January 2021 and March this year, 46,000 people lost money, totaling over $1 billion, in cryptocurrencies. According to the article, more than half of the victims said the scam started with an advertisement or post on social media. Instagram and Facebook are behind 32% and 26% respectively and involved fake investments. I thought Facebook and Instagram were for looking at pictures of your dinner party or your dog sleeping on your sofa.
Lonely hearts, also known as “romance scams,” accounted for $185 million in losses since 2021. Scammers who created fake online identities then developed online relationships with vulnerable targets and defrauded money with scams such as debts that had to be paid before they could leave the country they were in to join the victim and be together.
The article concludes by saying that, unlike traditional banks, there is no formal way to report suspicious activity and it is only possible to reverse transactions with a hard-to-acquire private key. The growing incidence of fraud has led to renewed interest in stricter regulation.
The FTC highlights three things to remember about crypto:
- Only scammers will guarantee profits or big returns. No cryptocurrency investment is ever guaranteed to make money, let alone a lot of money.
- No one legit will ask you to buy cryptocurrency. Not to fix a problem or to protect your money. Suspect a scam.
- Never mix online dating and investment advice. If a new love wants to show you how to invest in crypto or asks you to send him crypto, suspect a scam.
Why is cryptocurrency attractive?
According to an Investopedia article, most cryptocurrencies have a limited supply, capped by mathematical algorithms. This makes it impossible for any political body or government body to dilute its value through inflation. Additionally, due to the cryptographic nature of cryptocurrencies, it is impossible for any government agency to tax or confiscate tokens without the cooperation of the owner.
But the markets may be dominated by speculative trading, which means cryptocurrencies could have another month like May again.
So when Matt Damon comes on TV and tells you to invest in Bitcoin because “Fortune smiles on the brave,” the follow-up question should be, “How much Bitcoin has Matt invested in, and has- Did he take cryptocurrency for the ad or good old greenbacks?Warren Buffett, on the other hand, is convinced that crypto will ‘end badly.’ I tend to side with Buffett.
For me, a man who’s never won a game of Monopoly, I’m in no mood to lie awake every night wondering if there’s anything left in the piggy bank in the morning.
If you are that person, do your homework.