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If you’re investing in Bitcoin, watch out for scams like these

Alan Oscroft
Diagonal chain made of zeros and ones. Cryptocurrency and mining.

One of the biggest advantages touted by cryptocurrency enthusiasts is that Bitcoin and its peers aren’t under the control of snooping authorities, with nobody able to trace what you’re doing with your money or to interfere.

But I keep reading of people who’ve lost money in crypto scams, and they often complain that the authorities aren’t helping chase up the crime to get their money back. Well, come on, they can’t have it both ways!

Missing cryptoqueen

The scams keep on coming, with the case of the missing cryptoqueen in the news again this week. Ruja Ignatova was the glamorous face of the OneCoin cryptocurrency, appearing at Wembley Arena in 2016 to promote the new alternative to Bitcoin. This was when Bitcoin was just taking off and trading for hundreds of dollars, long before it reached its all-time high of $19,783 in December 2017, and others wanted in on the act.

As it turned out, OneCoin was fraudulent, punters lost their money, and Ignatova is nowhere to be found. And UK investors are still being conned into buying OneCoin today.

In Germany, another blockchain offering was shut by the authorities this month, after fraud allegations were raised. Karatbars, which also used glitzy launch events, is suspected of being a pyramid scheme. But with hundreds of millions of pounds claimed to have been invested, is it really possible to stop people trading it online and drawing in more dupes?

FCA crackdown

Back in the UK, some crypto managers and pundits are slamming the Financial Conduct Authority (FCA) and its crackdown on new start-ups, complaining that the FCA is asking a lot more questions and making it a lot harder for new schemes to get off the ground these days. Well yes, that’s the whole point.

With things like this going on, coupled with various thefts from Bitcoin exchanges, and even the existence of completely fake exchanges, what should Bitcoin investors do to keep their cryptogoodies safe?

I think asking that question is missing the point — it’s a bit like asking what’s the safest way to play on a railway line. The answer, of course, is to steer clear of the stuff altogether.

Three reasons

I’ve suggested three reasons I might buy Bitcoin, though none is ever going to come to pass, and I have to confess that my colleague Peter Stephens’ three reasons for ditching Bitcoin in favour of FTSE 100 stocks are far more convincing.

Peter’s reasons, which cover the increasing enthusiasm and sophistication among those selling crypto investments (including new generations of derivatives), and the waning enthusiasm for Libra (which is intended to be a stable asset-backed cryptocurrency), suggest to me that we’re probably passing the climax of the crypto craze. I think we’ve been heading for the death of it as an investment for some time, but it could be a long and lingering affair.

And to add one more reason for preferring FTSE 100 shares to cryptocurrencies, I’ll just add that £100 invested in the UK stock market in 1945 would have soared to around £180,000 today, even after inflation.

Investing in the FTSE 100 is easy too. A FTSE 100 tracker can help you tap into the performance of the country’s leading listed shares with little effort. Do it via a Stocks and Shares ISA and your capital gains and dividends are protected from the taxman. 

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Views expressed in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Motley Fool UK 2019