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Cathie Wood's $500K Bitcoin call is already happening — how to ride the wave to half a million – Yahoo Finance

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Cathie Wood isn’t afraid to make bold predictions.
Back in early 2018, the owner of Ark Invest said Tesla shares would go from $300 to $4,000 within five years — a potential upside of around 1,200%.
Yet Tesla hit the target early. This January, Tesla shares surged past the $800 mark, or $4,000 on a split-adjusted basis.
Pretty astounding, but Tesla may not be Wood’s most bullish call at the moment. Last month, she told CNBC that the price of Bitcoin could soar to half a million dollars in five years.
“If we’re right and companies continue to diversify their cash into something like Bitcoin, and institutional investors start allocating 5% of their funds in Bitcoin […] we believe the price will be ten-fold what it is today. Instead of $45,000, over $500,000,” she said.
Bitcoin is already moving in that direction; the cryptocurrency trades at around $62,000 at the time of this writing.
Here are a couple ways to play the crypto boom, even if you’re just dabbling with some of your “spare change.”
Wood herself is offering a new way to invest in cryptocurrency. In September, Ark Next Generation Internet ETF tweaked its prospectus to include exposure to Bitcoin via Canadian ETFs.
The first bitcoin ETF on the New York Stock Exchange just started trading last week, but Canada has been ahead of the U.S. for a while. Several Bitcoin ETFs launched in Canada this year, including Purpose Bitcoin ETF, 3iQ CoinShares Bitcoin ETF, CI Galaxy Bitcoin ETF and Evolve Bitcoin ETF.
In the U.S., the debut of the ProShare Bitcoin Strategy ETF was arguably a major catalyst behind Bitcoin’s latest rally. The fund holds bitcoin futures contracts that trade on the Chicago Mercantile Exchange.
Investors who want exposure to the crypto market can invest in these ETFs, but you can also buy Bitcoin directly. Some investing apps allow you to buy both cryptocurrencies and ETFs commission-free.
Companies that have tied themselves to the crypto market provide another way for investors to benefit from the crypto rally.
For instance, enterprise software company MicroStrategy purchased 9,000 bitcoins in Q3. That brings its total bitcoin count to 114,042, a stockpile worth roughly $7 billion.
Because of MicroStrategy’s huge Bitcoin stake, some investors have used it as a proxy for investing in the cryptocurrency. In the past, rallies in Bitcoin usually led to similar moves in MicroStrategy’s share price.
Then there’s Riot Blockchain, which mines Bitcoin and hosts Bitcoin mining equipment for institutional clients. Thanks to soaring Bitcoin prices, Riot shares have returned a staggering 577% over the past 12 months.
Investors can also check out Coinbase, which runs the largest cryptocurrency exchange in the U.S. The company’s share price fell below its IPO price of $250 during the summer, but the recent pop in cryptocurrencies has brought it back to over $300.
And while crypto stocks can be pricey, you can get a piece of these companies using a popular app that allows you to buy fractions of shares with as much money as you’re willing to spend.
At the end of the day, cryptocurrencies are volatile. Not everyone feels comfortable holding an asset that seems to make wild swings every week.
If you want to invest in something that has little correlation with the ups and downs of the stock market and the crypto market, you might want to consider an overlooked asset: fine art.
Contemporary artwork has already outperformed the S&P 500 by a commanding 174% over the past 25 years, according to the Citi Global Art Market chart.
Investing in art by the likes of Banksy and Andy Warhol used to be an option only for the ultra-rich, like Wood. But with a new investing platform, you can invest in iconic artworks, too, just like Jeff Bezos and Bill Gates do.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
Fears of the new Omicron Covid variant slammed the stock market Friday. Here's what investors should do now. Li Auto earnings are on tap.
This super-investor says the market is due for a historic decline. It's time to listen.
The fast-spreading strain of coronavirus roiled markets on Black Friday, raising concerns about how the economy and Wall Street may perform next week.
Buffett is taking profits off the table. It might be time to do the opposite.
The wealthiest dynasties have seen many bitter battles over power and inheritance.
Wall Street skidded lower on Black Friday as investors reacted to fresh travel bans related to a variant of the coronavirus that causes COVID-19 called B.1.1.529, that has been identified in South Africa.
Here’s some really good news: More Americans have a cool $1 million or more in their retirement accounts than ever before. The Boston-based investment giant says the number of 401(k) accounts with seven-figure balances swelled 84% in the 12 months ended June 30 to 412,000, while the number of seven-figure IRAs jumped more than 64% to 341,600.
Electric vehicle sales are skyrocketing, and companies that produce charging infrastructure are scrambling to meet the soaring demand
In this article, we discuss the 10 best EV charging stocks to buy now. If you want to skip our detailed analysis of these stocks, go directly to 5 Best EV Charging Stocks to Buy Now. Several EV charging stocks surged in mid-November following the signing of the trillion-dollar bipartisan infrastructure spending into law. President Joe […]
New technology allows you to get in on the ground floor alongside the billionaire.
Many growth-dependent stocks have seen significant pullbacks in a recent bout of market volatility. Tech stocks have been volatile across 2021's trading, and concerns about rising Treasury bond yields and valuation levels have caused some investors to move out of riskier plays in the sector. With that in mind, a panel of Motley Fool contributors has weighed in with some of their favorite discounted growth picks.
The S&P 500 is still up almost 5% over the past seven weeks. That’s one reason a small dip isn’t concerning some strategists—yet.
Amid Beijing crackdowns and other headwinds for U.S.-listed China companies, here are the best Chinese stocks now.
In this article, we will be taking a look at 10 dividend stocks to buy and hold. To skip our detailed analysis of dividend investing, you can go directly to see the 5 Dividend Stocks to Buy and Hold. Apart from typical blue chip stocks like Amazon.com, Inc. (NASDAQ:AMZN), Intel Corporation (NASDAQ:INTC), Microsoft Corporation (NASDAQ:MSFT), […]
Gold has been following a contrarian script over the past several months, including this past week when it fell by almost $100 per ounce. Consider the average recommended gold market exposure level among several dozen short-term gold timers my firm tracks on a daily basis. This average rose to 70.3% on Nov. 16, which was higher than 97% of all other daily readings since 2000 — well above the 90% threshold that in prior columns I used to define excessive bullishness.
The stock market was definitely not in a holiday mood on the day after Thanksgiving, as news of the new Omicron variant of COVID-19 led to widespread concerns about a possible return to lockdown conditions. Because of the Dow's price-weighted nature, a few stocks had a disproportionate influence on the average's moves. Below, we'll look at how American Express (NYSE: AXP), Boeing (NYSE: BA), and Goldman Sachs (NYSE: GS) combined to lop about 250 points off the Dow by themselves.
What percentage of the total amount of money in the world is Bitcoin? What kind of space does cryptocurrency occupy in the global economy?
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Barron’s panned these three U.S.-listed Chinese EV start-ups in December 2020. Things look different now.
American Express used to offer an air of exclusivity. The Gold, introduced in the late 1960s, was targeted at “big-spending members” before the more sought after Platinum came two decades later.

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BLOK, A Diversified Way To Enter The Cryptocurrency Market. – Seeking Alpha

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Leonid Sukala/iStock via Getty Images
Editor’s note: Seeking Alpha is proud to welcome Diego Prados as a new contributor. It’s easy to become a Seeking Alpha contributor and earn money for your best investment ideas. Active contributors also get free access to SA Premium. Click here to find out more »
The growing blockchain ecosystem is a fast-changing environment that involves many different industries due to its high number of applications. This relatively young market has a lot of growth potential as adoption increases and developers continue to build the so-called new internet.
Since the launch of Hashcash, which was originally proposed as a mechanism to throttle systematic abuse of un-metered internet resources such as email and anonymous remailers, in May 1997, an uncountable number of projects have made the crypto space. As of December 2021, more than 16,000 projects were listed on Coinmarketcap averaging a total market capitalization of around 2 trillion.
Additionally, crypto-related stocks have been listed on many exchanges giving investors a different exposure to the crypto market than those who only invest in digital assets. This is where the Amplify Transformational Data Sharing ETF (BLOK) stands out as it helps investors gain exposure to Bitcoin and other cryptocurrencies through a mix of pure and diversified crypto-friendly companies.
On November 17, 2021, Amplify ETFs announced that they have surpassed $5.21 Billion in assets under management combining all the ETFs they offer. The company had also said that this was an increase of 57% in their combined assets under management (AUM) for 2021, way above the US average for the same period. Most of the ETFs managed by the company are thematic and focused on high growth potential industries such as the Lithium & Battery ETF (BATT) or the Digital & Online Trading ETF (BIDS). Thematic ETFs accounted for $2.98 billion which is 57.2% of the total AUM for which BLOK accounts an astonishing 32.6% of the total company AUM with $1.7 Billion in AUM as of the date of the announcement, following an increase of more than $900 million in inflows year-to-date.
The Amplify ETF team is managed by leading professionals in the ETF sector. The CEO and Founder of the company, Christian Magoon has launched over 70 ETFs in his more than 15 years’ experience in the financial sector. The President of the company, William Belden, has previously worked closely with Christian in developing the ETF product line for Claymore Securities, a company which was launched on 2006 by the actual CEO of Amplify ETF.
The company also works with numerous firms for their expertise and specialized focus across various market segments including names like Toroso Investments (BLOK’s portfolio managers), EQM Indexes or Emerita Capital.
BLOK is an actively managed ETF that focuses on the blockchain ecosystem. The fund will have at least 80% of their holdings dedicated to companies involved in the crypto space independently of the sector they belong to and it is classified as diversified by the company. It invests in different sectors such as Software & Services, Banks, Semiconductors or Diversified Financials. Geographically, de-fund distributes its assets mainly across North America, with a 74% weight but also targets Asia-Pacific and Eastern Europe both with an 18% and 8%, respectively.
BLOK “is designed to invest in the public companies that are further in the blockchain and participating in this transformational change in how data is shared”, said Michael Venuto, portfolio manager of the BLOK ETF and co-founder of Toroso Investments.
Bitcoin reached an all-time high on November 10 last year of 69,044.77 US$ according to CoinGecko. This is a 704.736% increase in price since last halving event in May 2020. The following graph shows how Bitcoin has performed over the last 3 halving events, and the standard deviation of the daily returns for that same period of time.
Author
Source: made by the author using matplotlib with daily close data up to 1/12/2022 from investing.com.
On one hand, the data shows that volatility has decreased from 0.1136 between 2012 and 2016 to 0.0425 between 2016 and 2020. On the other hand, returns have been affected dropping from an astonishing 5156.45% in period 1 (from the first halving to the second) to 1216.32% in period 2. As of 11/01/2022, Bitcoin has yielded 385.03% since the reward for bitcoin mining was reduced to 6.25BTC per block mined. This number is far from the gains of past halvings at this point in time (around 600 days after the halving event occurred), but there is still plenty of time until the end of this cycle so in my opinion, I think there still exists a possibility that new all-time highs can take place during 2022.
As the cryptocurrency market rallied this year, with Bitcoin gaining a 45%, BLOK had a 14% increase in price in FY2021 falling from a >75% gain when it had hit a new all-time high in November. Performance for the past two months can be explained by the selling pressure coming from China.
To illustrate this picture, it has to be said that December 2021 was the deadline for exchanges to close their existing users’ accounts in Mainland China.
Considering technical indicators, it is relevant to mention that during 2020, the average trading volume for BLOK was 25,153.97$ and last year that number increased to 392,479.43$ a 1460.3% increment YoY. It is also to be said that, over the last 3 months, the average volume goes up to 660,491 which can be interpreted as if the asset volumes hadn’t lost momentum despite the fall in price in the past few weeks.
Furthermore, as said before during the introduction, the product’s assets under management topped $1,7 billion as of November 2021, current AUM nears $1Billion during the first week of 2022 as the price tanked as much as 40% since all-time highs.
We will start the analysis of the security by comparing different statistical methods to assess the risks involved in the profitability of holding the asset against different alternatives.
Yahoo Finance
We will first take a look at the risk metrics of the asset from top to bottom. First thing to analyze is the Alpha and the Beta coefficient. These parameters come from the Capital Asset Pricing Model which derives from the Markovitz Model. The model tries to explain an asset’s return by simply running a linear regression of an asset’s daily returns against the market to obtain an expression like:
Asset’s return = Alpha + Beta * Market return + Error
So, in this particular case, the returns of the asset explained by the market would be measured by the Beta coefficient, and the Alpha coefficient would represent the returns that cannot be related to market movements. With all that said, we are happy to see a positive and greater than category average number for the alpha coefficient, but market risks are higher than the sector average. This is caused by a greater covariance between the market and the asset. A higher standard deviation for the returns also signals a greater risk in comparison to the sector but when considering the Sharpe’s and Traynor’s we conclude that the risk weighted returns are much larger than the category average. The Sharpe ratio stands at 1.06 against 0.86 even though BLOK has a standard deviation twice as large as the category. Same thing happens with the Traynor’s ratio as the beta of the asset is greater than the average but still beats the market’s average.
Metric
Blok
S&P 500
iShares ACWI
BTC-USD
VaR 95%
-0.0352
-0.0192
-0.0177
-0.0603
CVaR 95%
-0.0537
-0.0344
-0.0313
-0.095
Median
0.0014
0.0011
0.0009
0.0007
Source: Produced by the Author with data on daily returns from Yahoo Finance and Investing.com.
To finish with the risk-return analysis we will look at Value at Risk and Expected Shortfall (CVAR) both at a 95% confidence level combined with a return metric which is the median. The table shows us that the highest median daily returns are achieved with BLOK but it also shows that the risk we assume by having exposure to BLOK rather than the S&P 500 or ACWI is a lot higher too. Meanwhile, BTC remains the riskiest asset with the lowest median return of the table, and the reason BTC appears on this chart is to compare the risk of holding BTC with respect to BLOK as we can appreciate the value at risk of the ETF is close to half of what Bitcoin shows.
According to the company, the ETF invests in numerous sectors such as Diversified Financials, Software and Services or Semiconductors. We will now examine the assets with the biggest weights in the fund and compare them with the sector averages to judge on valuation.
Diversified Financials
In the ETF, as of July 31, 2021, 22.2% of the holdings were concentrated in the financial sector. This sector encompasses a broad selection of companies involved in the crypto market both in a direct and direct way. In this sector, the company tries to put together the most representative companies involved in crypto trading and payments. The companies with the biggest weights in this sector are displayed below with their respective valuation ratios.
Holdings as of 1/14/22
Weight (%)
PE Ratio
PEG Ratio
P/CF Ratio
P/S Ratio
SBI Holdings
4.82
7.1746
0.0431
7.6397
1.1885
Coinbase
4.66
17.3051
0.0061
5.0029
5.5023
CME Group
4.36
32.9165
2.531
33.5008
8.5238
PayPal
3.66
42.8972
0.7529
35.3867
17.2674
Weighed Sample Mean
17.5(Total)
17.4455
0.8962
14.0141
5.1120
Sector Median (Financials)
11.80
0.20
9.03
3.44
Source: made by the author using data from seeking alpha.
SBI Holdings is the company with the biggest weight in the portfolio as of 1/14/2022, but also the one with the best valuation ratios among the sample, beating the market with an attractive valuation. Second in the list is Coinbase, the famous cryptocurrency exchange that completed its IPO back in April last year. Coinbase manages to achieve better valuation ratios than the median of the market except for the P/S ratio, but it stays close to it.
To finish with our sample, both CME and PayPal fail to beat the market in terms of valuation. PayPal at least beats the market when it comes to growth beating the market in the PEG Ratio by 16%.
The main characteristic of this sector the growth rate at which the companies increase their cash flows and earnings with an average PEG ratio of 0.8962 comparing to that of the S&P 500 of 1.11 recorded on November 2021.
Software
The main activity developed by companies chosen for the ETF within the sector of Software is cryptocurrency mining. this activity accounts for more than 22.5% of the fund’s investments as of 1/14/2022. In the fund’s holdings, there are included 9 out of the top 10 crypto mining stocks that control more than 50% of the Bitcoin network.
Bitcoin Mining Stocks
This particular type of stocks are very good to replicate bitcoin prices as the ETF does not invest in bitcoin itself. Moreover, these are cash flow generating companies against bitcoin itself that can be better seen as a commodity.
Bitcoin Fundamentals: Mining Profitability Ratio & BTC Dominance
Historically, halfway between halving events, a huge increase in prices follow, increasing miner’s revenue due to higher transaction fees. This pattern is likely to occur in the following months. According to Coinmetrics.com, total miners’ revenue has topped $38 Billion since the genesis block. In 2021, total revenue grew an outstanding 80.95% from $21 Billion. Furthermore, the ban on cryptocurrencies coming from China helped the network to decentralize and redistribute miners’ rewards.
After performing an analysis of the fund, the conclusion is that the ETF can be a good buy opportunity for the following reasons:
Diversification: Diversification plays a very important role in picking cryptocurrency investments. As the market is so young and volatile as well as unpredictable, it is even more convenient to diversify risks among different kinds of assets and owning BLOK can be a great strategy to achieve diversification.
Active Management: Many people would argue that active management is a good thing to consider when analyzing a fund (as the efficient market theory says most traders won’t be able to beat the market). But the thing is that in such a fast-changing environment in my opinion you must rely on professionals who can actively track the markets in order to adapt to the new conditions in the fastest ways possible.
Combination of Direct and Indirect Plays: I personally believe that it’s a good thing that many of the companies that appear on their holdings are not directly related to the risky crypto space. This means that those companies will benefit from the cryptocurrency market but will be able to survive if this one is not performing as expected as it is not a main driver of revenue for them.
Long-term growth opportunity: In valuation terms, the companies involved in the ETF, particularly the ones that belong to the financial sector, offer a great opportunity in terms of growth, as the cryptocurrency market can still increase its influence in the way finance is developed nowadays.
Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.
This article was written by
Disclosure: I/we have a beneficial long position in the shares of BLOK either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Derivatives Data Shows Softening Crypto Enthusiasm – CoinDesk

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Boat without sails
Lawrence Lewitinn
Lawrence Lewitinn is CoinDesk's managing editor of global capital markets.
Follow @lvlewitinn on Twitter
Several months ago, investors facing FOMO – the fear of missing out – worried that the ship had sailed when it came to crypto. Now, however, while that ship may have left the harbor, the wind is out of its sails as it floats directionless for the time being. Perhaps it’s because of upcoming Fed tightening; enthusiasm seems to have dampened. That sentiment is backed up by some market data showing market activity has fallen and that could take prices with it.
1. Funding rates have gone negative.
Bitcoin Funding Rates vs. Price (via CryptoQuant.com)
Rates from several major exchanges compiled by analytics firm CryptoQuant show that the cost of borrowing to buy crypto on leverage has fallen to the point where it’s slightly negative. That implies that demand for money to make leveraged bets has taken a hit. Traders aren’t in any rush to add to their positions.
2. Open interest (OI) in bitcoin futures is down slightly since the last week of December.
Bitcoin Futures Open Interest (via Skew.com)
It’s currently $16 billion, according to data site Skew.com, down from just shy of $19 billion around Christmastime. During bitcoin’s November peak, open interest was roughly $26 billion.
3. Ether futures also have seen declining open interest.
Ether Futures Open Interest (via Skew.com)
Since its own November peak of $13 billion, open interest for the smaller ether futures market is currently around $8 billion.
4. Options open interest on bitcoin and ether are down to where they were in early October.
Bitcoin Options Open Interest (via Skew.com)
OI for bitcoin options is now at $7 billion and $5 billion for ether. Back in December, those figures were around north of $10 billion and $7 billion, respectively.
Ether Options Open Interest (via Skew.com)
Some of the falloff can be attributed to year-end bets taken throughout the course of 2021. While current OIs are still significantly larger for both cryptocurrencies than where they were last year, they are still roughly where things were in October, before the big run-up in prices.
5. Implied volatilities on bitcoin are falling precipitously.
Bitcoin At-The-Money One-Month Implied Vols (via Skew.com)
Implied vols, which are calculated off options premiums and gauge the market’s view of future risk, are down to levels not seen since October 2020. To be sure, regular levels in crypto implied volatilities would signal alarm and panic in the equity market, but since the second week of December, crypto’s implied vols have drifted down. In the past couple of days, that drop has accelerated. One-month at-the-money implied vols are now at 60%; they had been hovering in the 80% range since the summer. When demand for options falls, implied volatilities fall with it.
6. Ether’s implied vols are also down.
ETH At-The-Money 1-Month Implied Vols (via Skew.com)
Now at 69%, implied volatilities on one-month at-the-money options on ETH had been around the 100% level since June. It has been over a year since they were regularly below 70%.
The list goes on and on.
Of course, this doesn’t mean muted markets can last forever, but in the coming days or weeks, one shouldn’t be surprised if prices drift south.
DISCLOSURE
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.
By signing up, you will receive emails about CoinDesk product updates, events and marketing and you agree to our terms of services and privacy policy.
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The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.
@2021 CoinDesk

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Scammers Stole $14 Billion in Crypto in 2021. Here’s How Investors Can Protect Their Coins – NextAdvisor

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Cryptocurrency crime had a record-breaking year in 2021, with a new report finding scammers took $14 billion worth of crypto last year. 
That’s nearly twice the $7.8 billion taken by scammers in 2020, according to blockchain data firm Chainalysis’ “2022 Crypto Crime Report,” findings from which were released Thursday, Jan. 6. 
With a boom in cryptocurrency interest over the past year, it’s no wonder that “Olympic-level scammers” have taken notice of new opportunities for illicit activity, says William E. Quigley, a prominent investor and co-founder of the WAX blockchain. The high-tech nature of crypto will continue to attract sophisticated scammers, Quigley said during a panel discussion hosted by blockchain firm Light Node Media last month. 

Consider a recent “Squid Game” scam in which investors allege a new SQUID cryptocurrency token and related immersive online game were actually just an elaborate scam. Investors claim the developers disappeared after the currency skyrocketed in price and seemingly cashed out with more than $3 million.

Before You Invest In Crypto

Experts say it’s smart to keep your crypto investments under 5% of your overall portfolio. Crypto prices fluctuate wildly by the day, and experts also say you’d be smart not to invest more than you’d be OK losing if the market dropped out altogether. Crypto investments should also never get in the way of other financial priorities like saving for emergencies, paying off high-interest debt, and saving for retirement using more conventional investment strategies.

Experts say it’s smart to keep your crypto investments under 5% of your overall portfolio. Crypto prices fluctuate wildly by the day, and experts also say you’d be smart not to invest more than you’d be OK losing if the market dropped out altogether. Crypto investments should also never get in the way of other financial priorities like saving for emergencies, paying off high-interest debt, and saving for retirement using more conventional investment strategies.
Like it or not, crypto investors are opening themselves up to this new and evolving risk of fraud and scams. If you’ve incorporated crypto into your investment portfolio or are interested in investing in Bitcoin or Ethereum in the future, here are some common scams and red flags to look out for.
In the U.S., almost 7,000 people lost upwards of $80 million in crypto scams from October 2020 through March 2021, according to the Federal Trade Commission (FTC), based on scam reports filed in the U.S. That’s a huge jump over the 570 cryptocurrency investment scams and $7.5 million in losses during the same months just the year before. With cryptocurrency scams on the rise, here are some patterns to look out for:
If a seemingly credible person or retail establishment claims they cannot accept any form of currency other than Bitcoin, it’s likely a scam. Bitcoin and other altcoins are a burgeoning asset class, so experts say credible institutions aren’t going to accept crypto and not also accept U.S. dollars through normal means like wire transfers, checks, credit and debit card payments, and cash.
In general, anyone demanding you pay them in Bitcoin might be trying to hoard it and capitalize on its skyrocketing value. And unlike banks, blockchain lacks common know-your-customer (KYC) protocols. That means people can open wallets without having to present valid identification, a Social Security number, or an address and contact information. Though blockchain is public and creates permanent, open-access records, people can transact on blockchain more or less anonymously — making it easy to trick you, take your money, and run.
The lack of KYC protocols on blockchain is a major question mark for its widespread use, says Jonathan Padilla, former PayPal head of blockchain strategy and CEO and co-founder at Snickerdoodle Labs, a California-based blockchain data security company that’s looking at using blockchain to give consumers ownership of their cookies and browsing data.

“With a decentralized platform, there’s really no safeguards in place to say who is a good actor and who is a bad actor,” Padilla explains. “It’s really just buyer beware.”
On a promising note, blockchain can provide a new form of transparency: Since data cannot be altered or removed on blockchain, all transactions are public record. When Colonial Pipeline paid anonymous hackers 63.7 Bitcoin (valued at almost $2.3 million) back in June, U.S. Justice Department investigators were able to track the transactions on blockchain and seize the ransom money. 

“[The hackers] used a hosted wallet to move the Bitcoin around, which means [law enforcement] found them in about five days,” Padilla says. “There’s transparency built in [to blockchain], and now with the tools [coders are developing], you can use sophisticated software to do an on-chain analysis and track where these things go.”
However, it will be a matter of time before law enforcement agencies at every municipal level become familiar enough with new tools to investigate smaller-scale blockchain scams effectively. There’s currently still a possibility that crypto tokens, NFTs, and other digital blockchain assets could be used by bad actors to launder money on both small and large scales. 
“That’s a very real concern,” says Padilla. “For example, you could get money from Columbia, go buy an NFT with what was previously cartel money, and it could be washed in an NFT.”
Mass-scale money laundering isn’t super prevalent, Padilla says, but the tools and the compliance framework needs to catch up fast. 

“The tech is just getting where it needs to be … to be able to track where that money is coming from and where it’s going,” Padilla says. “But it hasn’t been there for the last half year,” since crypto and NFTs have exploded in popularity.
Sticking with beginner-friendly crypto exchanges like Coinbase and Gemini is one way to avoid risks that come with smaller, niche exchanges, experts say. It’s also a good idea for beginner crypto investors to stick with the two most popular cryptocurrencies — Bitcoin and Ethereum — which have a longer record of increasing in value than other new altcoins.
Like we saw with the “Squid Game” scam, sophisticated coders now have the ability to create new games and entire imaginary worlds on blockchain. And to do it as quickly as the next viral Netflix show takes off. 
An easy way to scam excited blockchain newbies is to get them to buy a type of newly minted coin or token for a game. If enough people drive the price up through supply and demand, this gives the original scammers an opportunity to sell all their holdings and disappear in a move known as a “rug pull.” 
Unlike bank accounts for federally regulated currency, there’s no such thing as fraud protection or FDIC insurance on the blockchain. When your money gets stolen on blockchain, the only way to get it back is for the recipient to pay you back directly. On a decentralized exchange, that’s highly unlikely. And while mainstream crypto exchanges have better fraud security measures than lesser-known exchanges, there’s still no guarantee for investors to recoup stolen crypto.

Cryptocurrency Investment Schemes

New forms of crypto are constantly being minted, and when new coins hit the blockchain it’s known as an initial coin offering (ICO). But ICOs are also opportunities for scams. A company or individual may say they have a once-in-a-lifetime opportunity to invest in a new form of crypto with guaranteed 1,000% returns. They may then pressure you into depositing a bunch of new coins into a digital wallet that’s been compromised somehow, or “pump and dump” by buying up the coin and selling when the price explodes.
Dating apps are rife with crypto scams. According to the FTC, about 20% of the money lost in romance scams from October 2020 through March 2021 was sent in the form of cryptocurrency. Scams like this involve long-distance or digital relationships in which one party pressures and convinces the other to buy or give money for some new crypto that’s really just a way to scam people out of their money.
This type of scam is as old as the internet, but with crypto there are some new implications. Just as a “normal” phishing attack would work, bad actors send emails attempting to bait recipients into clicking links and inputting their personal details — including crypto wallet key info. But unlike most passwords and usernames, you only get one private key to your blockchain wallets. This is part of blockchain’s decentralized design, ensuring that one entity cannot control your information, but it poses an issue if you ever need to change your key.
Even the most advanced and enthusiastic cryptocurrency experts understand there are many new and evolving risks in the world of crypto right now. Some have weathered scams themselves, such as the blockchain investor and entrepreneur Ian Balina, who said he lost $2.5 million after his private wallet key information was compromised by someone hacking into his Evernote account. 
Balina’s story highlights the possibility of loss and fraud when dealing with such a new, volatile asset class, even for successful investors.

Financial experts advise most passive investors to keep crypto holdings to under 5% of their portfolios, and never to invest in crypto at the expense of saving for emergencies or paying off high-interest debt. If you feel ready to start investing in crypto, here are some best practices to protect your money:
For starters, watch out for some common red flags that are similar to classic money wiring scams and credit card fraud:
Just like your physical wallet, you need to protect your digital wallets from hackers. Practice good digital security habits akin to how you’d handle large sums of physical cash by putting them in a safe or FDIC-insured savings account. 
Experts say small-scale investors with a few hundred dollars worth of crypto are probably OK keeping it on a mainstream exchange like Coinbase. However, if you amass thousands of dollars worth of crypto, it probably makes more sense to incorporate a wallet for additional safekeeping.
There are two types of crypto wallets, typically described as “hot wallets” and “cold wallets.”
Hot wallets are hosted, or stored online. They are secure, but more susceptible to hacking than cold storage, which is when you store crypto offline on a piece of hardware. Think of cold storage as kind of like a safe in USB-drive format. It’s more secure, but if you forget your password or lose the device, you could lose access to your money forever.
Crypto held in hot wallets is not FDIC-insured like cash in the bank. You’ll therefore want to make sure that whatever platform or wallet you store your crypto in has robust security measures, including:
You only get one unique key to access your wallet, says Mac Gardner, a Florida-based certified financial planner and founder of FinLit Tech. Losing your key or having it stolen could mean losing the crypto altogether.
“You need to have a lot of control around getting access to [your wallet key.] It’s not a thing where you can forget your username and password if you don’t write it down,” Gardner says. “Each code has a process and a certain number of characters. It’s extremely personalized because of this virtual space. If it wasn’t, anybody could go in there and then grab your stuff, right?”
You should report fraud and other suspicious activity involving cryptocurrency to the following bureaus using these links:
Also don’t forget to report the fraud to whatever crypto exchange you used to complete the crypto transaction whenever you suspect or have evidence that bad actors are at play.
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