By now everyone is aware of cryptocurrency. Even though many people thought it was going to fail, people still mock crypto online all the time, the fact is it’s probably here to stay. To give some of those crypto people their due, a lot of people have made a lot of money off of it. But like many new ways to get rich, most people soon realized you had to get in early and have some luck behind you. There seem to be more crypto fails and successes and the failures that have happened have been spectacular.
10. El Salvador’s Attempt to Give Everyone a Crypto Wallet Bombed
People who are super into cryptocurrency are sometimes called cryptobros on the internet. They get the “bro” suffix because, typically, these are men. Are there some female cryptobros out there? Probably. There was also an entire cryptobro country, and it was El Salvador.
In 2021, El Salvador took the historic step of making Bitcoin legal tender. The country went all in and provided every citizen with their own crypto wallet to allow for easy crypto transactions. More people had crypto wallets than traditional bank accounts. The bold step was ostensibly to usher in a technologically advanced era of financial independence with Salvadorians at the forefront of something that could have a world-changing economic impact. Except that never happened.
Despite spending $60 million, a year after the experiment started little had changed in the country. Few people used Bitcoin, few businesses accepted it and citizens said things were about the same or worse than in prior years.
The bulk of citizens abandoned their crypto wallet or used it to store dollars rather than cryptocurrency. Citizens were given a $30 incentive to download the wallet, called Chivo, and that’s what most citizens did. Then about 61% of people immediately dropped it, with the bulk of the rest using it to make e-banking easier, but with traditional fiat currency, not crypto. Only 1.6% of remittances were in Bitcoin just 5 months after launch.
9. The Average Cryptocurrency Only Lasts for 15 Months
Once upon a time, Bitcoin was the only cryptocurrency out there and, if you were smart enough to pick it up back when it cost almost nothing, you could be rolling in money right now. The problem was Bitcoin, once it got successful, proved to be the same as every other successful thing in the world. It inspired about a million copycats and while some of those have gone on to be successful, most have not.
You can barely swing a cat on the internet without hearing about a new kind of crypto coin if you’re tuned into that sort of talk. You start to wonder if the market is going to get over-saturated at some point. While that’s definitely a possibility, the fact is that most of these coins don’t last long enough to over-saturate the market in the first place. The lifespan of the average crypto is only 15 months. In 2018, 92% of all Blockchain projects had failed. In 2022, 83 crypto coins failed, up from 74 the year before.
Investing in crypto is therefore risky for two reasons. There’s the obvious one: it may never be worth any money, and somehow worth less than what you invested, costing whatever you put into it. The other thing is that if you wait a year, it might not exist anymore, so you still lose all the money you put into it.
Why do so many cryptocurrencies fail? The two biggest reasons are a lack of interest and fraud.
8. Every Year Billions in Crypto is Stolen
When crypto started gaining steam, many online articles touted how secure it was as a selling point. Go back to 2018 and before and you can find a lot of articles and forum posts about how Bitcoin is almost impossible to steal or, at least, how you can make it impossible to steal thanks to blockchain technology.
These days that point is emphasized less. New cryptocurrencies and old alike still mention all the security features, but so do bank vaults and bike locks. The fact that people can and have circumvented those security measures has put a different spin on the boastfulness, however.
In 2023, about $1.7 billion worth of crypto was stolen. That was actually progress, though. In 2022 the losses were about $3.7 billion and $3.3 billion in 2021.
Fifteen days into 2024 and $17 million in crypto had already been stolen. Millions more were stolen the next week in Canada. Another $20 million was yoinked in May. All told, the first quarter of 2024 saw $348 million stolen.
7. Crypto Exchanges Keep Failing
If you deal in cryptocurrency, you need to use a crypto exchange. These businesses allow you to do just what the name says, you can exchange, buy, and sell crypto. Turn your Bitcoin fortune into US currency, or invest your life savings in a coin inspired by a cartoon dog. Whatever works for you.
Like the currencies themselves, the exchanges have been known to have issues. Chief among them is that exchanges have a bad habit of failing due to poor management or fraud and costing people a lot of money in the process.
Every year, more exchanges fail. In 2022, FTX went bankrupt with a $9 billion deficit. Customers were out $8 billion and investors lost $1.7 billion. In July that same year, Three Arrows went bankrupt with $3.5 billion in deficits. There were 9 other significant bankruptcies that year alone.
In 2022, it was reported that 42% of exchanges since 2014 had simply vanished with little to no reason. Imagine if 42% of the banks we used just vanished in the last decade and there was no way to get your money back.
6. Reports Suggest 80% of ICOs Were Scams
If you’re not down with crypto lingo, you may not be familiar with the initials ICO. ICO or Initial Coin Offering is basically a round of funding before a new cryptocurrency launches. Usually, these are crowdfunded but not always.
In an ICO, the makers of this new crypto will offer coins to investors for cash to seed the launch of the whole operation. As an investor, you now have these coins which, theoretically, will be of value when the coin hits the market. Basically, everyone involved hopes this new crypto will be the next Bitcoin so they invest when it’s worth pennies and hope it explodes into thousands of dollars.
While every investment is a potential risk, ICOs are especially risky since research from 2017 shows that 80% of them are scams. Of the remaining 20%, only 8% actually reach an exchange and even have the possibility of giving you a return on investment. You literally have almost six times better odds of winning at Blackjack and only slightly worse odds of winning on a Vegas slot machine.
5. Millions of Dollars in Crypto Has Been Lost Thanks to Forgotten Passwords
We talked About security with cryptocurrency earlier, and there are a lot of security features in place to try to make sure your money stays where you left it. One of the ways that crypto is secured for individual users is with a password or key that lets you get into your wallet.
When you forget the password to your email, you can often just do a forgot my password test where you have to give them the name of your school mask out of your mother’s maiden name and then you can reset it. That’s not how it works with a crypto wallet. If you don’t remember your passwords, there’s no one else who can.
Something like Ironkey, which encrypts the keys, gave users 10 guesses at a password. If the user fails, the data will be lost forever. As much as 20% or $140 billion of all Bitcoin was lost or unrecoverable in 2019 because of things like people forgetting those passwords or reformatting laptops.
In 2021, a man named Stefan Thomas had tried 8 passwords to access his Ironkey which stood between him and $220 million in Bitcoin. In 2023 a group of hackers managed to decipher Ironkey encryption and offered to help Thomas get his money but he declined.
4. Mining Bitcoin May Cost More Than it’s Worth
Back when cryptocurrency was just starting to really take off, one of the big draws for a lot of people was the fact that you could “make” it yourself. Bitcoin mining requires a fairly impressive computer set up these days, usually giant warehouses full of computers, but there was a time when someone with a decent computer could have just done it themselves in their home.
The problem now is that if you were to try to mine Bitcoin on your own on a small scale, it would probably cost you more money than you would make doing it in terms of technology and electricity to pull it off. In fact, as of Spring 2024, it’s generally considered impossible for anyone with a small home set up to have a computer powerful enough to make it worthwhile to try.
3. Unpredictable Transaction Fees
One thing people hate about traditional banking is the fees. Banks will charge fees for pretty much everything. In 2023, US banks raked in $5.83 billion in NSF and overdraft fees. Crypto isn’t always a better option for avoiding those fees, however.
Bitcoin transaction fees can be volatile. One day they can be pennies and the next day they can be $40. In April 2024 they surged to $128. In a single day that led to over $78 million in fees.
Ethereum fees have gone as high as $70. The more transactions being done on the blockchain at a time, the more congested the network becomes and the higher the fees. In 2022, thanks to Bored Ape Yacht Club monopolizing the network one day, fees went through the roof. One user claimed he was trying to make a $5 transaction but was going to be charged $4500 in fees if he went through with it.
2. Few Business Accept Crypto as Payment
For those of us who aren’t in the crypto world, it’s still kind of hard to understand how cryptocurrency works. Why is it worth the money? Is it just because people want it? And, to be fair, that’s a legitimate reason for something to be worth money. People pay for all kinds of things that don’t seem to have any legitimate value to those with no interest in them. This is where the demand part of supply and demand comes in.
That being said, very few businesses accept cryptocurrency as a form of payment. That doesn’t mean no one does, and some large businesses do accept crypto. Every year more seem to accept Bitcoin. Currently, there are about 15,000 worldwide that do. However, relatively speaking, the number is low since there are about 334 million companies worldwide.
In 2021, Elon Musk said Tesla would stop accepting Bitcoin as a form of payment, striking a serious blow against the public perception of Bitcoin as a legitimate tender. Countries like the US and Canada do not accept them as legal tender.
1. Scams Are Rampant, Ever Changing, and Very Lucrative
More than once we’ve covered how crypto is susceptible to scams in this article, and we’re not quite done with it yet. The problem with cryptocurrency scams is that by the time you find out about a new one in the media, there’s probably another one you’ve never heard of before.
Most of us want to think we’re immune to scams. There’s every reason to believe that people who are into crypto, who by nature have a certain degree of techno-savvy, would think that they are also immune, maybe even more so than the common man. That’s exactly how scams propagate. They need people to think that. And the billions of dollars that have been lost in crypto scams prove that the scammers are the ones who are right, not the people being scammed.
In 2024 multiple crypto scams are circulating, some new and some old. Pig butcher scams, which are long cons that happen when a scammer forms a trusting relationship over time and then dupes you into investing in fraud crypto, have bilked people out of $75 billion already over the years.
Phishing scams and Ponzi schemes are old but effective and still happen all the time, as do rug pull scams where a fake investment is set up, and then, once funded, everyone vanishes. There are many others and, according to the numbers, crypto scams took people for almost $4 billion in the US alone in 2023. The vast majority of all investment scams are crypto scams these days.