Balancing out Cryptocurrency Investments - Written by Nicky Lowes

Cryptocurrency is a term that has quickly appeared in day-to-day use since it was popularised through the massive success of Bitcoin over the last decade. We often see the word used in stories detailing hugely successful investments, where people have made millions after buying stocks in up-and-coming digital currencies.

This fairly new and innovative market is certainly an alluring investment opportunity, which makes it a premier hunting ground for fraudsters looking to swindle professionals out of cash. As part of Scams Awareness Month, Citizens Advice Gateshead is offering you the facts about cryptocurrency so you can adequately protect yourself against online cons.

 

What exactly is cryptocurrency?

 Although it’s a bit of a mouthful to say, the idea behind cryptocurrency is quite simple: it’s a digital currency which uses encryption (a type of encoding) to store information in databases.

Transactions with cryptocurrency appeal as an alternative to traditional currencies for a number of reasons:

Over the past few years, the values of several cryptocurrencies have skyrocketed. Most famously, one unit of cryptocurrency Bitcoin (BTC), which was worth less than $00.01 (USD) in 2010, reached a value of $17,900 in December 2017. With other cryptocurrencies following similar trends, the industry has begun to attract large numbers of potential investors looking to make money quickly.

 

How do scams come into this?

The investment market has long been plagued by cons, a trend which is continuing; a recent study by Citizens Advice demonstrates that there has been a 6% rise in reported financial and legal scams over the past year.

 As a fairly new and laxly regulated industry, the cryptocurrency market is an appealing area of interest to swindlers looking to fool potential investors. Such fraudsters made headlines earlier this year when ActionFraud reported cryptocurrency scams were using high-profile names, such as ITV’s Martin Lewis, to trick victims into investing their money. Other cryptocurrencies, such as Onecoin (which is currently being investigated for commercial fraud), have been disavowed as multinational pyramid schemes. Meanwhile, other conmen have stuck to traditional phishing scams, spoofing the websites of cryptocurrency exchange sites to gain access to victims’ personal information.

With Millennials being drawn to the cryptocurrency market, these specific types of scams are likely to entrap a much younger demographic than that typically targeted by other scams.


Should I invest in cryptocurrency anyway?

Even if you manage to avoid con artists, cryptocurrency investment opportunities can be extremely risky and many economists have disavowed them.  At the end of last year, the deputy governor of the Bank of England warned against investing in Bitcoin and earlier this year numerous European regulators warned that the cryptocurrency ‘bubble’ is about to pop. Furthermore, this year saw a global crackdown on cryptocurrencies ranging from banks banning customers from purchasing Bitcoin to Google blacklisting advertisements for cryptocurrencies.

In the UK, MPs have launched an inquiry into digital currency, aiming to gauge the extent of both its dangers and opportunities.  This could potentially lead to changes in UK legislation which could affect cryptocurrency investors.

At Citizens Advice Gateshead, we encourage everyone to exercise caution with investments, particularly if they seem too good to be true. If you think something, sound suspicious, don’t miss a trick, report it on ActionFraud’s website: https://www.actionfraud.police.uk/report_fraud