Avoiding losing money in the cryptocurrency market scams influencers exchanges governments whales 10 Feb 2025

Have you ever heard the phrase "What's good for the goose, is good for the gander"? I like to play around with this phrase to give it more relevance "What's good for the goose isn't necessarily good for the gander".

In what may seem to be a Gerald Ratner own goal (the only time an individual will be named), we really want to make sure that those venturing into investment in general and in particular cryptocurrency really have a handle on the market. Quite frankly we're disappointed to see widespread mis-marketing of what is an exciting and innovative space with huge potential. The philosophy on Crypto Statto is to accumulate coins over a long period of time without putting in much Fiat - moving towards preserving wealth over the long-term. The belief here is that retail investors should use multiple tools to make informed decisions when buying and selling cryptocurrency. For example, we use multiple online platforms to get insights into the market to try and have regular reviews of individual assets and the market in general.

Some ground rules

• This article is opinion based, and is not intended as financial advice, please do your own research when investing
• Aside from naming a few cryptocurrencies, this article henceforth avoids naming individuals and companies to focus on common practices
• We are not going to give referenced examples and you can consider this article to be experential and thus - polemic
• This article will be quite extensive and not just covering the crypto markets
• Sticking to these rules may mean you miss out on bigger potential gains but hopefully he will go into the market with more perspective and wisdom
• If you don't understand anything in this article, do your own research
• If you think you understand anything in this article, still do your own research

You can lose money in all markets as a retail investor

It cannot be stated enough just how so-called safe markets are unsafe. Despite all the so-called protections offered by governments, the average retail investor loses out frequently.

Bonds

Bonds are a debt based instrument that companies and governments offer to acquire capital in exchange for pain the bondholder interest rates known as premiums. There are many variations on bonds such as zero coupon bonds. Investment banks can also strip the coupon from the bond to create cash flow based products for investment.

How you lose money with bonds

• Default - the bond issuer cannot repay the bondholders the capital and they lose their money
• Inflation - governments increase the rate of inflation and the amount you earn on the bond is lower than the inflation rate. This is one way that bond issuers can profit off the back of the bondholders by using the money given to them by bondholders to then buy bonds with higher coupons

Other features of this investment vehicle

• Most governments force pension funds to allocate a certain amount of their portfolio to government debt and some higher graded corporate debt
• Companies can also use debt issuances to buy back their own shares, pushing the share value higher which in my way benefits the coupon you are receiving from your bond

Equities

A traditional way for companies to raise capital is to offer a percentage holding in their company in exchange for capital. A company normally does this to reinvest in their company to grow it and increase revenue.

How you lose money with equities

There are so many ways that you can lose money with equities. ChatGPT Can give you a far better set of these, some obvious ones are;

• Company default
• Complete drop in the share price
• The listing of a company when the share price has dropped a lot
• Hard to prove but we sometimes see a company price having been driven down and then taken over forcing you to sell your stocks at a lower price
• Market manipulation - regulators may enforce fines, even jail people, but the chances of you getting your money back are low

Other features of this investment vehicle

The main issue that retail investors have when buying equities is that they're not as close to the market as investment banks and hedge funds. They collect vast quantities of data, build dozens of systems to manage their portfolio. Importantly, many of these professional investment companies are undertaking non-proprietary trading (not investing their own capital), and thus are not always a good indicator of whether a stock is a good or a bad investment. We all hear stories of big firms and individuals buying a stock but unless we know the actual trading strategy we have to consider it to be largely meaningless.

Precious metals - yes they are commodities, but…

As a retail investor there are a myriad of influencers espousing the importance of holding your own precious metals to protect you from the risk of bad financial entities running off with your gold or the government stealing it. There is no doubt that this has happened and will continue to happen. The current bull run of gold in their view proves that gold is a good investment.

How you lose money with precious metals

• Sharp drops in the value of the asset
• The illiquidity of the asset - you cannot sell this easily, and in difficult times even get market value
• Physical versus paper, more on that later
• Theft

Other features of this investment vehicle

This is the main same of this article so you will see this covered repeatedly throughout. Indeed it's mirrors my trading strategy with regards to cryptocurrency, although I am not doing the shady underhand approach that many influencers are doing.

The idea that silver and gold gurus keep repeating is to self-custody precious metals and keep buying. I guarantee that most of these gurus are using paper instruments to buy and sell paper instruments to accumulate more capital to then acquire more physical. As a retail investor you can do this but in many countries access to the more sophisticated types of paper assets are just not there for retail investors. There are some individuals I would like to call out on this practice, but in keeping with the spirit of this article I will not do so.

In-effect, all buy and hold precious metals holders are being rug-pulled. At best you are preserving your Fiat value with precious metals - which as an aside is scary as it shows just how much the average person is losing purchasing power in recent years.

Pensions

It is worth repeating that none of this article is intended as financial advice and this is my personal opinion on pensions. Personally, my own pension fund manager has done a good job on my pension but given the precarious nature of financial markets it is debatable what will happen when I retire.

The idea of a pension is that an amount of your weekly or monthly salary is deducted (pre-tax) an allocated to a pension fund, a company pension, a self-managed pension, and that the government by deducting some of your taxes will put your taxes into a state pension.

This article could be a book on why pensions are not as they seem for me they represent a certain percentage chance of having an income of sorts when I retire.

Here are some ways that you lose money with pensions

• Taxes on the back end, once you start redeeming your pension the government taxes you on income. Who knows what the taxation levels will be at that point in time?
• Company default, just look into some famous examples of pension funds becoming worthless when the company issuer declines
• Pension fund mismanagement - despite all the so-called ring-fencing and government protection, there are countless examples of this
• Not beating inflation, I talk with individuals about how their pension is going a famous one I've asked - "Is your pension beating inflation?" Most haven't even given that a second thought. Another one to ask "Is your pension solely in your employers pension fund?" and they say "Yes"
• Lost records - details of employment get lost and people cannot access their pension

Again this is a very contentious issue speak to a financial advisor, I don't wish to create panic and am expressing my personal opinion on pensions.

Property or Real Estate if you are an American

Property is perhaps the most falsely presented market there is. Am not going to get into this too much as it is such a vast area to consider. Instead we will simply list a few points to consider and leave it there;

• If you get a mortgage and pay off the principle plus interest offsetting inflation and then potentially paying capital gains tax in certain jurisdiction once that house is sold, are you actually making a huge profit?
• When you rent a property, and have increased landlord requirements from the government requiring maintenance and other expenses, are you genuinely making any profit especially in light of additional taxes?
• When you get problem tenants and have to pay expensive fees to evict them, is that returning a good yield?
• Can government regulations change that much during the course of your mortgage that you can severely lose out on the property? Think Capital Gains Tax or changes in inheritance tax
• Long term instruments such as property can be subject to extreme risk through big changes in interest rates, what does this do to your potential profit?
• Those that use interest only mortgages can suffer margin calls during low value periods of the property market cycle

Some other financial instruments that carry their own levels of risk

• Mutual funds and ETFs
• Hedge Funds
• ISAs
• Saving accounts
• Real Estate Investment Trusts (REITS)
• Peer-to-peer lending
• Foreign exchange
• Providing Equity for startups
• Contracts for difference

Perhaps the biggest fraud for most people

The biggest fraud in my opinion has to be - holding cash. That's all I will say on the matter, please do your own research.

All investment vehicles are just as open to scams as cryptocurrency

Sadly, so many people lose out and often are completely oblivious to the stealing of their money. Stealing may sound pejorative, but that is what you have to view it as.

The main problem with information in the wider space is that it is never as regular and consistent as for the professional investor. You could be taking a train somewhere a reason article about why pensions are so important, perhaps you read an article about the price of gold going up, maybe you see an article saying that American big take leaders are at threat from a new emerging Chinese company. The average retail investor is likely to take action upon reading an article such as these.

The fox in charge of the hen house

Another thing to consider is that running a Google search for investment scams, cryptocurrency scams it's going to bring up links to financial institution websites, government guidance pages, some university studies. The average person thinks that the government is there to protect them.

A personal story which I still have to recover the money from this company is a regulated FCA entity. The time spent to recover this money is barely worth the time but will obviously do so out of principle, this type of thing happens far too often.

The key takeaway is that only by self-education of mainstream information unless are well known information will you build up the right toolkit to understand risk. Again not financial advice please seek it and we can continue.

The cryptocurrency market

My personal journey with cryptocurrency

I started hearing about cryptocurrency in around 2017, this is because I have mostly worked inside financial institutions within fintech. They weren't that big on decentralised financial systems. Remember this isn't just because they want to protect their industry - it is also because they want to manage their existing operations and minimise risk.

Financial institutions operate under stringent regulatory pressure and the idea that they would simply adopt open-source technology that is new, is quite frankly ludicrous.

In a way, this is kind of what has allowed cryptocurrency to flourish in the earlier times. Many organisations just could not get involved in the technology because of the perceived risks - rightly or wrongly.

Many financial institutions started to try and write their own blockchains, which never got off the ground for obvious reasons.

Once I had lost significant amounts of money in cryptocurrency I started device strategies to accumulate cryptocurrency steadily over time. My strategy was to focus on accumulating cryptocurrency and has remained my main objective.

The key thing I learned fairly early are the following;

• Many rug-pulls/exit scams were genuine projects trying to get traction
• Many rug-pulls/exit scams were institutionally led - not naming the obvious one but we know what we're talking about
• Most mainstream opinion on cryptocurrency has had the effect of keeping retail out of cryptocurrency
• Most retail getting into crypto are going to lose large amounts of money, life changing amounts!
• Most influencers that say they're buying a certain coin may not be using their salary to do so
• External events does effect the price of cryptocurrency quite significantly, but most external events affects the price of other asset classes quite significantly
• Drawdown risk is real, you will hold certain cryptocurrencies over a long period of time on the price will just fall and fall and fall and fall
• Most announcements of new innovations and technology will not result in sudden massive increases in the value of that cryptocurrency
• Friends that suddenly install an app or two on the mobile think they're going to make money in cryptocurrency - they won't
• Very few retail investors getting into cryptocurrency have minimal understanding about how blockchain works and the importance of self-custody, "Not your keys, not your coin"
• Very few individuals have any understanding about basic financial rules and the implications of government regulation
• A lot of the fearmongering around a lack of liquidity there only being so much of a coin creates panic that is often unfounded
• SM channels are full of scammers using fake accounts, fake pictures, fake back-stories, fake companies only too happy for you to give them your crypto
• The market primary function appears to be to shake you out of your holding of cryptocurrency into lower forms of cryptocurrency and Fiat
• There are many well-intentioned influencers in the space just as there are in other asset classes
• You will never realise as much profit as you could have, that would always be emerging coins and classes of coins that someone else is telling you to get into or get out of
• The technology is not being used to anywhere near its capacity some will say that means we are early others will say that's evidence that it will not manifest into much at all
• My personal opinion is that cryptocurrency is simply becoming a replacement for bonds in the eyes of financial institutions
• You need more than just technical analysis to win in this market

Market uncertainty and fear

"Fear Uncertainty and Doubt", "Fear of Missing Out" are the two main ways to lose all of your money. Remember this is true of all financial markets to a lesser degree.

The basic premise is that somebody or some entity is buying something and you should be doing the same. The question is whether they are putting their own personal wealth and/or their regular salary into cryptocurrency? The other question is whether they are making actual profits on that purchase? The first thing to do is to simply look at the chart of that asset and decide if it makes sense or not? The next thing to do is to decide if you could buy that asset at a discount in future? Another thing to understand is whether that entity had some very different set of expectations as to what you may.

The understanding of an influencer saying they bought a coin and are expecting a 10x gain and what it really means?

Imagine that an influencer says this coin is going to 10X, they are buying, they can't advise for you to do the same, but they are all in - what does that mean? Does it mean that they have sold their house and are putting all that money into that coin? Or does it mean they are selling another coin and buying that coin? Have they sold their house bought a camper van with a Wi-Fi connection and put all their money into Bitcoin at the height of the market or have they simply sold some of their stocks and bought some Bitcoin?

When they say a coin will 10X what that means is if you put in $100 he would get back $1000 in fact nine additional units not ten. How often do you see an influencer come back to tell you that an earlier punt had manifested into that 10X gain they said was going to happen?

The reality is that the coin won't 10X, there won't be the liquidity to exit that position, and there's a strong possibility that the coin will fall quite a bit. Imagine now that you've put in $1000, $10,000, $30,000? How would you feel about that and it dropped to 5% of its value? Can you afford to lose that much money?

The bot accounts (they could be real people of course)

Crypto Twitter is full of accounts that keep regurgitating that they're buying coin X. Pick any top 20 coin, find some accounts, look at the time and date that they posted the tweet and see what actually happened to the price? On many an occasion you will see you would have lost quite a lot of money.

I want to give an example but won't name the individual, just look at Cardano. I personally tracked an account for a while picking tweets over a course of six months to see what actually happened to the price and in many situations you would have lost lots of money following what they said. There is no contract between them and you, they may have optimism and believe in what they say but that doesn't do anything for your net worth. Remember it's the same with other asset classes as already discussed within this discussion.

Looking at the long term price of an asset - is ignorance and optimism the same thing?

What does any financial institution offering retail put up see in the disclaimer? Something along the lines of "Past financial activity is not an indicator of future financial activity". Yet here we are with an inescapable fact that we must look at the long term price of any asset that we look to buy.

At the time of writing this article I took the one day, the three months, the lifespan of Cardano. Note, I personally own Cardano. I've accumulated Cardano over quite a reasonable length of time and its fiat value has declined. Without using differentiation to calculate the area under the curve I'm going to guess that at today's price maybe 15% of its lifespan has been higher than today's price. I've included the charts to give you an idea of this.

Cardano CoinGecko Chart 8th February, 2025

I then navigate onto Twitter and type in the search term "buying Cardano", many of famous crypto influencers are regurgitating the same phrases such as (paraphrased);

• "I'm buying Cardano"
• "We're so early in this cycle"
• "The all-time high was $3"
• "So undervalued right now"
• "I am buying ADA"
• "Imagine what could happen if the US government starts buying Cardano, what could it do to the price?"
• "Says it's going to billions and billions"
• "We hope you're buying the Cardano dip"

Does any of the above sound like rational objective advice?

Does any of this stack up?

The basic premise is that buying an asset way below its all-time high will be pretty much as good as if you bought in early to Bitcoin.

We cannot say whether it is a good idea to put a sizeable amount of money into crypto but could it be better to accumulate over a longer time horizon? Some may espouse the importance of dollar cost averaging.

It is my personal belief that you just do not want to put in tens of thousands of dollars into any asset class unless this is money that you can afford to lose.

Note - this is not an attack on ADA.

Accelerated ways to lose money

This is a true story talk to me by a friend I worked with in financial services, he told me about a colleague who lost £50k through investing in Bitcoin.

They heard that Bitcoin was really high in value and so they bought £50k's worth with their life's savings. The price dropped come up they sold it, the price increased, they bought it, the price dropped, they sold it, and so on.

The misconceptions on shorting and perpetual futures

Those unfamiliar with shorting and those that think they are familiar with shorting probably don't understand what it actually means. You either own an asset (long) or you don't own an asset (short). Being short in this capacity is absolutely fine, there's no obligation on you to do anything on the basis that you don't own gold plated hats. When you enter into a long position of an asset and decide to buy another asset in exchange for your long position asset, until that asset trade is settled you are short the target buy asset. For example, you have $500,000 you have offered for to buy a house with but you are short the house until the property completes. If the sale falls through you still get to walk away with the $500,000.

Without going into too much detail, many exchanges allow you to do short selling of an asset. A major way to lose money in crypto is to short coins in the hope that the price will fall and you can buy them back cheaper. It is more nuanced than this because effectively most are doing naked shorts. The critical thing here is that the price is determined are by the exchange and margin allocation will invariably be taken if the short asset moves to the upside.

For this reason, not financial advice of course, as with the rest of this article, I never do shorting in the market form of most crypto traders.

The way that I short is that if I physically hold an asset and have reasonable confidence that the price will fall, I may sell it and then put in a limit order to buy back when that price has fallen. If the price doubles, I have lost out on upside potential but I haven't actually lost physical Fiat monetary value. My hope is to acquire more cryptocurrency in the possible future that the price will rise.

Not understanding lag in market announcements and crypto influences publication of new intentions

Markets are emotional, sentiment it is a reflection of that, and influencers are not computers. If you uploaded a video to YouTube, you know it takes time to actually upload it. An influencer making a statement on Twitter may have made their trade days ago. Maybe they went on holiday or are moving house? You just don't know their time horizons, how consistent they are in their methodology, and why they're discussing the particular perspectives they hold on the market that they are.

This does not mean we should not look into the many great people involved in the space and their content, but we must be very careful to take it literally. An increasing trend is for lesser known influencers to quote other influencers whom themselves may have quoted other influencers. I myself, may share other influencer's tweets and videos.

Some professionals are super busy and just put out content when they can.

For that reason always pay attention to being drawn into emotive content that may be significantly out of touch with the current market trend.

Being drawn into de-fi staking projects

I myself did try and stake a coin of an emerging gaming protocol and probably lost most of it based off of a channel advocating the potential of this coin. We will all fall for these types of scams. It wasn't very much money at all but it all adds up.

Using trading platforms that does not have the underlying assets for you to take off into your own custody

The number of times I get shown some app on a friends mobile that they installed and they think they're buying cryptocurrency is staggering. I check the fees, and they are exorbitant. They asked me questions such as which coins to buy, why hasn't this one gone up, or tell me that they've lost money on a coin. What do you say to people like this?

The best you can do is try to give them a minimal amount of education but they don't want to hear about that, they just want to become rich.

Not understanding X gains and X losses

Yes I've covered this one before but the idea that you will put in $100 and become a millionaire is ludicrous. It is just as ludicrous as putting in £100k and expecting to not lose most of it.

Social media channel scams

As you start to learn more about cryptocurrency you will start to use Social Media channels to learn more about your preferred coins and blockchains. Once on these channels, you will get Direct Messaged (DM) by users looking to get you to join the platforms that offer fantastic returns and all you have to do is deposit some cryptocurrency. Most blockchains, once you send that value you can never get back. These types of platforms often use the money from newer customers to pay the older customers to keep give them the idea that returns are coming in and at some point the platform will shut down and all the capital withdrawn in what is known as a classic "Exit scam".

I have spoken with a lot of these so-called scammers and many of them are completely unaware that they are scamming people and are actually genuine individuals that believe they are onto a financial certainty. Some of these scammers have lost 10s of thousands of dollars themselves because they built up capital for the platform only to find that the money they thought they had saved to draw down from in the future is no longer there.

Just the other day I had somebody DM me. The conversation went something like this;

• "Hey how's it going?"
• "Not bad thanks, how are you?" (already expecting this to be a scam)
• "Where are you from?"
• "Country XXX, where are you from?"
• "I'm from Switzerland, Bern!"
• "Oh great, I was in Switzerland recently it's a nice country!"
• "I'm an accountant from Switzerland, but I also do investing accountancy therefore is not my only source of income!"
• "Great do you have a LinkedIn profile, who do you work for?"
• "I'm sorry, I don't understand what you're asking?"
• "Most people have a LinkedIn profile perhaps you do too, so I can check you are who you say you are?"
• "Come on that's silly, of course it's me!"
• I notice your surname isn't Swiss perhaps you married somebody from Scotland? I checked online for the provenance of your surname and it appears your surname is Scottish?
• "How did you know that I married somebody from Scotland? Anyway I wanted to tell you about this great platform it offers fantastic returns and I'm making a lot of money through it."
• "Please tell me the company and I'll look into them thank you"
• "Sure, here is the certificate of incorporation"

I then go online and do the following;

• Check their website, normally I see that the website has been designed in WordPress - nothing wrong with WordPress but these types of sites can be put together quite quickly
• I check their content and find frequent grammatical errors
• The company that they say is registered is either a dissolved company on something like Companies House or in other countries equivalent government incorporation scheme
• I check the office location and it often doesn't stack up

Often, I then do the following

• Explain to the individual that's the company maybe a scam and is likely to be fraudulent and that they themselves could be on the hook for fraud - it does not matter if they knew it was fraudulent or not in many jurisdictions
• Explained that if I partook in such a programme by myself on the hook for being involved in fraud
• Explain that the amounts of money being offered by way of return are completely nonsensical and unachievable
• Often I close the conversation by saying please do not get involved in this type of scam you may eventually lose all your money and could yourself be guilty of abetting fraud
• This is not a professional opinion, but please consider what you are doing

Occasionally, people come back to me and tell me that they lost all their money.

Other variations include obvious use of ChatGPT to generate conversational points that's try to infer some degree of relationship between you and the other party. This can go on for a while and sometime reciprocate for fun by creating a conversation channel in ChatGPT to reply to them for weeks. Occasionally they realise that I'm doing the same as what they are and they close the conversation, after having had their time wasted.

Remember these scams go on not just in cryptocurrency. Whether reporting in these types of scams is required in your jurisdiction is for you to know, but it would become a full time job to continually report these scam attempts to regulators.

Taxes

Governments are seeing cryptocurrency as a cash-cow and you may be in the unfortunate situation where governments can come after you for money that you no longer have. Personally, I will be looking to professionalise my investment strategy or move to a jurisdiction which is more crypto friendly but it is worth highlighting this as a risk. Note, it is interesting that many tax free government schemes push people towards more traditional financial markets that also tax incentives but don't do the same with cryptocurrency. Make of that as you will.

Wrapping up this article and what I do to try and remove the noise when involving myself in any investment

Information is key

The one thing I've learned some having worked in financial institutions is the amount of information these institutions process is unfathomable to the average person. No retail investor can have access to the same amount of information on the market that these institutions have - but you can get access to useful information that may offer different perspectives. If you are going to be involved in a market, you have to have regular reliable sources of information. Information must be actionable with some degree of confidence.

Personally, I use multiple platforms and produce reports to try and understand the market on a consistent basis yes, shameless self-plug, I do use Crypto Statto. However, I do not just use Crypto Statto. I cannot get more honest than that.

Emotion is your enemy

Reacting to influencers, and announcements is human nature but try to be rational in your decision making.

Learn about the projects you are thinking to put your capital into

As a technologist I do have a strong advantage in understanding what makes sense and what is unfeasible. If you don't understand technology, this does not mean you cannot look into projects but try to get a feel for what you think this blockchain or token can provide.

Spreading your custody

Imagine you have $200,000 in Coinbase. To quote the Dustin Hoffman film - the Marathon Man, "Is it safe?" I like Coinbase, I think what they're doing in terms of offering more tools to developers and market participants outside of just trading is fantastic but would I have all of my money on their platform?

Would I put all of my assets on a hardware wallet?

Where would I store my passwords and keys?

Can I trust custody solution providers to hold my assets?

Try to get to a point where you are no longer putting your own fiat into crypto

This sounds impossible, but this is precisely where I am. Have I still put some crypto in the last year or two - yes, tiny amounts. Only when I wanted to acquire a cryptocurrency I felt was undervalued and I didn't want to exit active trades between other asset pairs.

Follow many influencers and understand what they are truly about

I personally know some influencers. It is vital you try to understand what their approach is. They may not even explain what they're trading mechanism is and you may be acting upon information that fits their trading strategy and not yours.

Be aware of misplaced optimism and pessimism

On the one side, we have highly enthusiastic individuals pushing the market and on the other side we have mainstream media telling us that everyone involved in cryptocurrency are criminals and drug dealers. It is a fantastic technology offering huge benefit to society as a whole. My personal interest is to build real products as the right blockchains emerge. This is my belief and you should have your own convictions.

Take the highs with the lows

The one thing Crypto teaches me is that you can go from feeling "King of the Hill" to "Stig of the Dump" in a matter of hours to weeks. There are millions of people with assets in other classes that are on a long term downward trend over many years that happens in days in crypto.

Thank you for taking the time to read this - keep learning, keep it real