Beware the Crypto Jungle

Investment advisers win new clients by raising their hopes of becoming rich. Yet advisers perform their most valuable service when they save a client from becoming poor.

That service was never needed more than now, the age of cryptocurrencies.

Observers who couldn't believe their eyes when Bitcoin's value soared last year turned out to be right. Research suggests that only half the price rise was real – the rest was market manipulation.

Bitcoin mania spawned a swarm of entrepreneurs offering ideas, plausible or not, for cashing in on promise of blockchain. Steve Bannon, former White House adviser and Breitbart leader, reportedly has toyed with the idea of a new cryptocurrency called the "deplorable coin."

Four out of five initial coin offerings have been scams, according to one study. Why are people so eager to believe – and invest in – unlikely ventures? As The New York Times technology columnist observes concerning Bitcoin mania, it involves the willing suspension of disbelief:

[E]ven though the possibility of [Bitcoin] manipulation was mentioned often last year, it took months to put together detailed evidence that it had happened. 

And in that time, the whole world — the financial press, ordinary investors, anyone looking for the next windfall — put more money into Bitcoin. Even though lots of people should have known better — even though we all know the internet is lousy with scams — Bitcoin, we were told, was different. 

Nope, it wasn’t. Scams are everywhere online. Never let your guard down.