Or, as Investopedia explains it: “The greater fool theory argues that prices go up because people are able to sell overpriced securities to a ‘greater fool.’ … That is, of course, until there are no greater fools left.”
But it turns out many Americans are hip to the hypocrisy and hype surrounding cryptocurrency.
Of those who have heard of cryptocurrency, 75 percent say they are not confident that current ways to invest in, trade or use cryptocurrencies are reliable and safe, according to a survey by the Pew Research Center, based on a poll of 10,701 U.S. adults in mid-March.
Right on the money, America.
Recent revelations about corporate mismanagement, fraud and bankruptcies in the cryptocurrency industry have investors rightly concerned. According to Pew, 17 percent of U.S. adults say they have invested in, traded or used a cryptocurrency.
This was the first time Pew measured confidence in crypto as an asset class. And the skepticism is high across all age groups, genders and race, said Monica Anderson, associate director of research, internet and technology at Pew.
Some 85 percent of adults 50 and older familiar with cryptocurrency were not confident in its reliability. But young adults give it the side-eye as well, with 66 percent also saying they aren’t confident about its reliability and safety.
The concern is high even among people who have invested, with 43 percent saying they are not very or not at all confident in it.
“You could be investing in this and still have reservations about it at the same time,” Anderson said.
And the great promises of riches?
It hasn’t materialized for most folks.
Pew found that 45 percent reported their investment performed worse than expected, compared with 15 percent who said it outperformed.
Has crypto investing delivered on the best-thing-since-sliced-bread claims influencers would have you believe? Not even close.
When asked about the impact these investments have had on their personal finances, 60 percent said it has neither helped nor hurt, Pew found. Twenty percent said their investments have helped, while just 7 percent said that cryptocurrency has helped their finances a lot. And 3 percent said that it has hurt a lot.
Here are some other findings from the Pew survey.
- 31 percent of folks who have invested in, traded or used cryptocurrency aren’t currently invested in crypto.
- 43 percent of crypto investors are worried about its security.
- 80 percent of women say they are not confident in it, compared with 71 percent of men.
Regulators have long warned investors about the volatility of cryptocurrency as a currency and as an investment. Now marry the excitement about digital assets and the technology behind them and it’s the perfect environment for fraudsters to profit from people eager to invest in crypto, fearing they will be left out of the next great thing.
Digital currency made the North American Securities Administrators Association’s latest list of new investor threats.
“Cryptocurrency isn’t bad or dangerous, but when promoted as an investment, especially one that promises high returns over a short period of time, investors should exercise extreme caution,” said Amanda Senn, chief deputy director of the Alabama Securities Commission and co-chair of NASAA’s enforcement section. “Cryptocurrency transactions aren’t often conducted in a way that comply with laws designed to prevent fraud, and which licensed financial institutions implement as part of their fraud prevention programs. The same red flags of fraud involving fiat currency also signify crypto scams, only they are more attractive to investors due to the publicity and relative newness of cryptocurrency.”
Don’t turn over money to crypto without conducting a considerable amount of due diligence, Senn said.
Yet, that’s exactly what fraudsters are hoping won’t happen. They mimic the casino model. They distract folks with the hope of striking it rich.
“It’s new and unknown, and investors think they can make a lot of money quick,” said Miles Faggert, a special agent with the Alabama Securities Commission.
This month, the Justice Department seized digital currency worth an estimated $112 million linked to cryptocurrency investment scams known as “pig butchering,” which refers to the practice of fattening a pig before slaughter.
Many modern pig-butchering schemes are often associated with digital-asset-related scams.
“Using the methods of traditional con artists, high-tech fraudsters have taken advantage of the publicity and hype surrounding cryptocurrency to encourage an untold number of Americans to invest in get-rich-quick schemes,” U.S. Attorney Martin Estrada said in a statement.
Last year, investment fraud caused more losses than any other scam Americans reported to the FBI’s Internet Crime Complaint Center — $3.31 billion. The Justice Department said cryptocurrency scams, including pig butchering, represented $2.57 billion — that’s 78 percent — of those losses.
If you’re interested in cryptocurrency, just remember every bet you’ve ever made.
