The Risky Business of Investing in Crypto

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Crypto investments have become commonplace in wealth management, and especially so amongst the younger demographic. Yet despite the buzz around cryptocurrency, there’s something about the practical experience of it that’s a little more shocking. 

Despite its volatility, cryptocurrency has retained its popularity as a form of investment. According to the recently published data of Saxo Markets UK, 56 per cent of investors plan to increase their allocation in the digital asset this year, whilst 59 per cent would increase the amount they’re investing if the industry was more regulated.

Furthermore, its data highlighted how the biggest concern for investors aged between 18 and 34 was the crash of the crypto market. It’s been an increasingly unsteady period for some of the market’s biggest coins. Bitcoin for example, has dipped 32 per cent over the last three months yet has risen 22 per cent over the course of the last week.

This could suggest that unless investors are wise with their assets and keep close track of their highs and lows, capital could quickly end up going down the drain. Certain coins are more suited for certain kinds of investment, and the ability to manage and recognise asset progress with ease will be something young investors will be hoping to gain in the future.

Crypto crashes happen every week at some level, and the market’s unpredictable nature only obscures the waters further. The excitement around a certain coin builds up its value, whilst the popularity that surrounds others can leave as quickly as it arrived.

But sometimes the price of a coin plummets so low that it ceases to exist at all. In the two years since February 2020, around 1,000 coins have met their end, joining a wider graveyard of around 2,400 coins.

A cryptocurrency can be considered ‘dead’ when its trade volume falls below $1,000 for the past three months, or when its website is taken down or the developers abandon the project. All of these actions render the cryptocurrency unviable and useless to investors, therefore making it a dead coin.

The recent figures from Traders of Crypto provide an insight into why this process happens. 1596 coins have been abandoned due to a loss of volume, 239 died because the initial coin offering (ICO) failed, 33 didn’t leave the ground because they were a joke, and an exclusive two had limited volume.

Why do cryptos die? Image source: Traders of CryptoWhy do cryptos die? Image source: Traders of Crypto
Image: Traders of Crypto

However, the data showed that besides the loss of volume, 528 coins died because they fell subject to scams; one of the biggest concerns for young crypto investors. These can manifest in many different ways. Sometimes money will be raised for a non-existent project in a scam ICO, whilst some owners might artificially inflate the price of a coin by cultivating false hype before selling off the majority share; in a scam known as ‘pump and dump’.

Scams can also take place by hacking into crypto wallets or by creating entirely fake wallets, and unfortunately, Ponzi crypto schemes are also on the rise.

The biggest crypto scams in history

The OneCoin scam – one of the biggest Ponzi crypto scams in history – robbed hopeful investors of $4billion between 2014 and 2016, before its exchange was unexpectedly shut down in January 2017. Whilst the company’s co-founder Sebastian Greenwood was arrested in 2018, its founder Ruja Ignatova has remained at large since she vanished in 2017.

The BitConnect scam is as equally as notorious. When the price of the coin peaked in 2017, it was hailed as one of CoinMarketCap’s best performers of that year. However, the party came to an abrupt end when the coin’s founders left the market soon after and took their ill-gotten gains with them. In September 2021, its founder Satish Kumbhani, along with promoters such as Glenn Arcaro, was sued for the $2billion fraud scheme by US regulators. Arcaro pleaded guilty, however, the whereabouts of his coconspirator Kumbhani remains unknown.

The more recent Squid Game saga sits as one of the most well-known crypto scams of our time. Riding on the success of the popular television series, the price of the coin grew by 45,000 per cent, peaking at $2856 per coin. This was before red flags emerged in the eyes of investors, who were now being asked to purchase ‘marbles’ to withdraw their money, from a website mired with errors and spelling mistakes. Investors started to pull out of the scheme, and so too did its majority shareowners; leaving those still left in the game with virtually nothing. Read more on this modern age crypto scam here.

  • Tyler is a Fintech Junior Journalist with specific interests in Online Banking and emerging AI technologies. He began his career writing with a plethora of national and international publications.

https://thefintechtimes.com/the-risky-business-of-investing-in-crypto/