Better than money in the bank? A digital gold rush? The future of finance?
One-in-five Australians now own cryptocurrency. From Bitcoin, the so-called “digital gold” of the crypto world, to the thousands of ‘alt’ or alternative coins, the pandemic years have seen a spike in crypto uptake by everyday Aussies.
Three months ago, we decided to join them. As part of a three-episode series hosted by Marc Fennell, “The Feed” bought $500 worth of digital currencies. We wanted to find out more about what crypto is, what it does, and whether now really is the time to buy in.
“With great risk comes potential for great return,” Fred Schebesta, co-founder of comparison website Finder.com and crypto entrepreneur, told us.
“With cryptocurrency, you can go and buy an extremely risky thing and potentially, yeah, it’ll go to zero, but it also could be the next Facebook or Google.”
Buying the cryptocurrency was the easy part. There are any number of crypto exchanges with apps that will allow you to buy and trade digital currencies with the flick of a finger. All you need is a phone, some ID and a credit card.
We started off with what some would consider the safer options; we bought some of the higher market-cap coins like Bitcoin and Doge. But then, hoping for some sweet, get-rich-quick returns, we invested in a few smaller alt coins.
We bought one called Reefer Token, which has something to do with streamlining the sale of legal cannabis. We bought another called No War Token – we figured it had a good message given what’s happening in Ukraine. And we also put some money into a coin that’s linked to a virtual porn metaverse, and a few other random tokens that we thought looked promising. Flush with finfluencer-fuelled enthusiasm, we thought, “What could possibly go wrong”?
Well, turns out there’s a lot we didn’t know.
“I hope you can afford to lose that,” was the initial reaction of AMP chief economist Shane Oliver when we told him what we’d done.
He says it’s a high risk investment with less tangible value than traditional shares or commodities. According to Oliver, “you could get lucky” and your crypto might go up in value, but it’s also just as likely to go down. “It’s very, very volatile so you really need to go in with your eyes open, you really need to be careful.”
Not long after our chat with Shane Oliver, our crypto portfolio took its first hit. One of our alt coins that seemed to be going really well, suddenly and unexpectedly crashed to zero.
“You’ve been scammed,” the founder of SEEK Token, Robert Browning, told us. From his home in rural Indiana in the US, Browning and his team audit crypto projects and send out warnings to investors about those they think have red flags. We’d apparently lost our money in a “rug pull”, a scam where the coin’s creator runs off with investors’ money at its peak.
Fred Schebesta, co-founder of comparison website Finder.com and crypto entrepreneur.
Regulators and law enforcement are struggling to keep pace with the huge developments in the crypto space, and criminals know this. “When you can make 80 or 90 or a hundred thousand dollars a day, why would you not continue to launch (new coins) morning, noon and night?” Browning says.
We also got stung by what’s known as a “honey pot” with another coin we invested in. According to its chart, the coin’s value was steadily increasing. But when we tried to sell out, we couldn’t. All we got was an error message. Our money had, once again, disappeared.
It’s not all doom and gloom. With a week to go in our crypto experiment, there’s still hope that profits from our other coins might make up for the losses.
But even seasoned investors say don’t put in more than you can afford to lose.
“I’ve touched almost everything in crypto, and good things have happened and bad things have happened,” says Schebesta.
“There are projects I’ve invested in that have gone to zero. That’s just the nature of it…. I’m playing a high risk game”.
Schebesta says at the end of the day, you’ve got to acknowledge the volatility of the crypto space, and take responsibility for what you do in it. “It’s your trade, it’s your money. You have to put your big pants on to play crypto”.
Follow The Feed’s crypto experiment tonight at 10pm on SBS One, or on SBS OnDemand.
Any profits made through the investment will be donated to charity.