Cryptocurrencies are all over social media. Especially on sites like YouTube and Reddit, it can feel like everybody is trading them, promoting them or bragging about their ‘big wins’. Even though ‘cryptos’ are everywhere, but most people don’t really understand them — and that can make them risky.
If all of your friends are investing in cryptos, it can feel like you should too. Like all gambling, we’re more likely to take risks if our friends do. Before you open your digital wallet you should make sure you know what you’re getting into.
People often don’t consider investments to be a form of gambling, but at Gambling Help Online we often hear from people who come to realise that their investment portfolio has become a toxic presence in their lives, as anxiety-inducing and compulsive as other forms of gambling. As cryptocurrencies are a particularly risky form of investment, they should be approached with as much caution as a trip to the casino.
What are the risks?
Cryptocurrencies and initial coin offerings (ICOs) have emerged over the last 15 years as ‘investments’, but you could lose a lot of money if you dive in without doing your research first.
The Moneysmart website has some advice you should consider before putting any money into Bitcoin or the many other cryptocurrencies and ICOs on offer. The Moneysmart site advises caution because:
- There are few safeguards in place to protect your investment. Like internationally-based online gambling services, the markets where you might go to buy into cryptocurrencies and ICO are not regulated and may fail. You will then lose your money.
- The values of cryptocurrencies can move quickly over short periods and they are therefore highly speculative. Speculative investments inherently present a high level of risk.
- The digital wallet where you keep your currency may be hacked and the money stolen. You will have little chance of getting it back. Recently a ‘white hat’ hacker stole and then returned more than AU$830 million worth of crypto to demonstrate the vulnerability of a peer to peer cryptocurrency platform.
- Scams: There are cryptocurrency and ICO scams that steal millions. Many present themselves as legitimate investment opportunities.
The culture of crypto
ABC Financial writer Madeline Morrie also recently warned of the things she wished she knew before she invested even a small amount. Here are a couple of her warnings:
- Jargon: The crypto world is full of jargon, slang and acronyms that can make knowledge hard to come by for outsiders. This can make it hard to make informed judgments about whether you should invest. The world of crypto is new and evolving and there’s no foolproof ‘set and forget’ option for beginners to use as they familiarise themselves with crypto investments. Many people find themselves thrown into the deep end before they’re ready.
- Be ready for spam and scams: As soon as you engage with any crypto content online, you’ll be bombarded by crypto-related marketing, people trying to sell you stuff — and scammers. Cryptocurrencies scams are growing. According to the ACCC, more than half of the scams that snared Australians in the first half of 2021 were crypto scams.
- The value of crypto can be arbitrary: Prices are extremely volatile and sometimes price dips or rises seem completely random. Cryptos are also vulnerable to the outside world: prices plummeted when China banned all cryptocurrency trading, and have also reacted to announcements from companies like Tesla about whether they will or will not be accepting bitcoin as payment. The effect of world events on values are outside of your control.
Protect yourself
You might have a friend that insists that cryptocurrencies are a sure thing. They might try to activate your FOMO and have you investing before you’re ready. If you’re going to start trading crypto, make sure you’re ready. Here are a couple of key tips we’d like you to keep in mind before you commit:
- Invest some time into learning about cryptocurrency and ICOs from reputable sources:
- Keep your guard up against scams.
- Begin with spare money you have. Don’t borrow to invest, and make sure you have enough to cover your bills.
- Don’t invest money that you can’t afford to lose.
If you’ve already invested in crypto and you’re feeling like you’re in above your head, we’re here to chat. Give us a call on 1800 858 858 or chat to us online.
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