This applies to all investors not just senior crypto citizens.
FRAUD risk – A micropayment to buy the wizard dildo in some online game. A USD100 million USD/BTC exchange. For practical purposes each transaction works exactly the same way. One click or screen tap executes an irrevocable contract. Consequently the crypto world is riddled with click traps that can make all your hard earned ether evaporate into the ether forever. Untold fools fall into these traps. Don’t get a crypto habit until you got an anti-fraud habit. Before you tiptoe into cryptoFind a friendly guide . Then follow well-trodden paths. And even then watch out because fraud traps can be very well camoflaged. Fraud is probably the biggest risk for old fools.
SCAM risk – Old timey investors will be more alert to this one. A bunch of self-proclaimed geniouses get together to launch an enormous undertaking that’s guaranteed to be the Next Big Thing. Then it floats. The enormous undertaking instantly inflates a huge moon bubble. Geniouses cash out. Bubble pops, coin drops. All the investors wail and sigh and clutch their breasts. Traditional securities markets have stacks of regulations to prevent this sort of thing from being toooo obvious. Crytpo? Virtually nothing. Apply your old fart experience and you should be able to snatch a bunch of cash from the cryptokiddies.
REGULATOR risk – The tower of SEC has swiveled its red unblinking eye toward the Mount Doom of crytpo. US citizens who are also residents, and possibly those who are not (citizens and/or residents, no one seems quite sure) are currently prohibited from buying crypto company securities, (sorry ICOs/tokens) unless they are an Accredited Investor, for which the bar is set pretty high. Citizens/residents/whatever of China, Bolivia, Brazil, Algeria, Nepal and a bunch of other places are also totally locked out. Theoretically. Scam companies/currencies/exchanges ignore all this and carry on cheerfully as if regulations don’t exist. Actually this risk is huge and unquantifiable and a likely trigger for the inevitable mega crash. It appears prudent to follow the most regulated path. Do not risk crossing regulators because their memory is as long as their claws are sharp.
REGULATOR scams – Just yesterday bitcoin flopped because some Korean government bigwig said crypto was henceforth banned. Then it shot up again after another official claimed that announcement was just, haha, someone’s personal opinion. Or something. Details are murky. Crypto gossips suggest the regulators were working a dump-pump scam. Who the hell knows. The point is regulators are in an ideal position to work scams themselves. Who regulates the crypto regulators? Answer… No one.
PONZI risk – Ponzi schemes appear amazingly easy to pull off in crypto. But no one bothers because you got to pay some of the participants in Ponzi schemes. Ponzi will be the next generation of crypto scam. Today it’s much easier to start a scam company or currency and don’t even bother about promising returns. Just come up with a great one-line business description, a credible sounding team (don’t worry, no one will check) and away you go. Investors will throw cryptocurrency at you. Just take it. No one will care. Yet.
CUSTODIAN risk – This is high. Crypto exchanges and dealers are notoriously prone to fraud, hacking and collapse. The prudent crypto freak spreads their assets around multiple exchanges and servers and computers and accounts.
HACKER risk – You can keep your crypto assets on your computer or mobile phone. USD1 billion (in crypto) can be stored on a piece of paper – or even a QR code asset ass tattoo. It’s up to you. Some suggest the safest approach is to buy a hardware wallet. Or two in case you lose one. Or three. Just remember, no matter where you keep your crypto stash, some clever hacker can always hack it away from you somehow. Reduce this risk by understanding and applying best practice.
STRIPPER risk – Imagine a bunch of young geniouses get first mover advantage in some field – say insurance – which could totally benefit from crypto blockchain innovations. They issue a coin that quickly moons and transforms them into billionaires. The lure of beaches and strip clubs distracts the bros (almost all these startups are bro-driven) from insurance. Someone does a better job and investors get screwed. Solution? Look for crypto ventures led by people that have long been dedicated to that field and are less likely to be too distracted by a couple of billion bucks.
Idiot risk – To spend 10 seconds in a crypto forum is to behold idiocy writ large. But I really understood crypto is full of fools when I saw someone proudly state in a forum, and I quote, “I am a wise investor”. Anyone in crypto who imagines they are wise really has no clue. When the market is full of fools (and everyone is a market fool at least some of the time) things can get ugly real fast. Be a fool by all means, but don’t fool yourself that you’re wise. Because that makes you an idiot. Which is risky for you but a buying opportunity for the wise fool.
FUD/FOMO risk – Crypto chat is full of commenters spreading Fear Uncertainty and Doubt (bears), and Fear Of Missing Out (bulls). Veteran investors will understand the power of emotion to cloud judgment. Formulate a strategy. Don’t risk more than you can afford to lose. Try not to be too scared or greedy. Apply your honed traditional investor instincts and outperform the flighty young whippersnappers.
FAKE NEWS risk – Traditional securities markets apply heavy penalties for anyone who issues fake news to move markets. Crypto? Hahahaha. I’ve traced numerous “news” items only to find they come from sources that are about as reliable as old Trumpty Dumpty.
Having said all this (and yes I can spell genius), all crypto risks can be mitigated or mostly avoided. There is opportunity aplenty.
I’ll have to update this list from time-to-time. As every ancient investor learns, the biggest drag on a market is uncertainty. There’s an elephant’s buttload of uncertainty in crypto.
Geezers and geezerettes who enjoy investing, and who can drive a computer, can relatively easily learn crypto investing.
So come on boomers. Get yourselves into the boom. Next post we’ll look at the joys of crypto.
DISCLAIMER: Disclaimers are for lamers. This is crypto FFS. Investments can go up and down. Especially crypto. And so fast that you can lose a fortune before you even realized you had one because the markets never close and presumably you need your beauty sleep. Oh BTW I may or may not have an interest in any enterprise or outright fraud mentioned here. Who knows, I may be even be pumping and dumping. Why the hell not? Currently it's all fair game in crypto. But that will probably change soon in many jurisdictions so keep reading this disclaimer coz you might actually learn something about what the regulators are up to.