While the returns on some cryptos can be extremely high, the industry is rife with schemes and scammers.
With the value of ether up by almost 200% since this past year, investing in crypto can seem like the best choice.
But as anyone that has been around a lot of crypto bros could tell you, it comes with high volatility and high risk: crypto is the asset class that has posed the largest risk to investors.
“Before you hop into the crypto craze, think about the cryptos and other financial products that might be nothing more than the public facing Ponzi schemes,” said Joseph Rotunda.
The reason has to do with the regulatory rules that have a difficult time catching up to the high number of new cryptos (often released by people with zero finance background) releasing onto the market. The success of BTC and ether are usually used to produce a type of craze around a new concept that is still misunderstood by a lot of people.
A crypto advocate, Republican Sen. Cynthia Lummis has proposed a bill that would set clear guidelines on crypto regulation and taxation in December.
Non-fungible tokens (NFTs) are used to receive ownership of online content. NFTs are another cryptocurrency subcategory currently getting a lot of investor attention — while more popular ones such as the Bored Ape Yacht Club could sell for millions, but fake ones are appearing online already. (Based predominantly on the ETH network, most NFTs are selling for ether.)
Other high-risk trades include anything that has to do a popular Self-Directed personal Retirement Accounts scheme, promissory notes, and social media investment offers.
To minimize your risk, the agency suggests people do their own research on founders, carefully study domain names (there are scammers that will copy a popular site by adding only one letter) and usually avoid grandiose promises to “make a million dollars” tomorrow.
“Investments in crypto trading programs, interests in cryptocurrency mining pools, securitized coins and crypto depository accounts should be seen for what they truly are: very risky speculation along with a high risk of loss,” said Rotunda.