Dabbling in the likes of Bitcoin is not for the faint-hearted, that's for sure. You may recall the Edinburgh financier in a New Town wine bar, a day or two before the first COVID-19 pandemic lockdown (seems such a long time ago).
Then, my single malt companion was bemoaning the 'get-rich-quick' cryptocurrency marketplace, exclaiming: 'Digital gold? More like, what was I thinking?' Fast forward and we caught up with each other, agreeing it shouldn't be a surprise to anyone that it turns out the crypto coin is a double-sided virtual phenomenon which has possibly reached something of an impasse. Yet it's not going away: just the reverse in this age of the internet.
Apologies for all the dollar signs here. Just as it hit a landmark $50,000 target (for a single coin), cryptocurrency's digital backbone, known as blockchain distributed ledger technology (DLT), a bit of a mouthful there, has been seriously breached. Hackers apparently attacked a gaming-focused blockchain platform, Ronin Network, a few days ago and extracted $600m. This is not supposed to happen but only goes to show that even the most supposedly secure cybersecurity systems can be got at. Hacked private keys were used to forge two fake withdrawals and it only became known when a user could not withdraw 5,000 crypto tokens, worth $17m, from the network.
Crypto was introduced to an unsuspecting marketplace as a reaction to the 2008 financial crash. It has forced countries, governments and regulatory bodies, in somewhat feverish catch-up measures, to control such an unfettered digital coinage. The cryptocurrency industry has been repeatedly criticised for failing to offer sufficient investor protection. One commentator remarked: 'Frankly... it's more like the Wild West'.
Outwith regulatory control, the cryptocurrency market has experienced a spike in double-dealing transactions, with rising numbers of investors losing everything. It represents a more insidious side to the likes of Bitcoin due to a profound lack of transparency and online security hitting digital money freewheelers.
Such is the extreme volatility of internet-based currencies, that fluctuations are monitored and viewed as easy meat by scammers ready to pounce and leave in their wake an untraceable digital trail, along with their victim. It can only get worse. Cryptocurrencies are a playground for online predators preying on unwitting speculators. This is especially so when they are based on the net's 'alter ego', the dark web, that is reputed to be at least three times the size of the official net, where drugs and firearms are traded with consummate ease.
As an aside, one uplifting feature of the dark web is that Russia's internet censorship, affecting literally hundreds of news outlets and social media platforms, has forced citizens to utilise it via virtual private networks (VPNs). This has enabled them to keep connected through what's known as a secondary remote server, bypassing online restrictions. In the case of Russia, read censorship.
Where there's a will, there's a cyberway, and this is also the case with cryptocurrencies. Some governments and financial institutions are taking this on board and regulatory control is thought to be round the corner. What is continuing is growth in a massive range of digital tokens out there. Such is the allure of a decentralised network, it continues to attract an ever-growing legion of followers, with cyberbrokers continuing to resist government and regulatory control. It's cold comfort to the unwitting individual or couple who have handed over their life savings to what turns out to be a non-existent cryptocurrency trading platform, discovering too late that it doesn't exist and they've been the subject of an elaborate fraud.
Finance apart, a profound downside remains, which has been described as a mental health crisis associated with cryptocurrency investors, subject to the levels of stress and anxiety that go with funnelling hard-earned cash into such a volatile market.
It's all very well that some 'experts' describe crypto as an exciting and democratised form of investing, with the prospect of untold wealth. More than one seasoned financier has spoken of 'sleepless nights' wondering what is happening to their money as they've become 'addicted to crypto', well and truly trapped in a cycle of attempting to recover losses but only losing more.
It's called gambling and is pretty well identical to the Vegas casino roulette online. Mind you, losing 7,000 bucks in four hours on a 20-dollar machine could be considered small-time compared with one poor individual who lost $127m worth of bitcoin in 2017. Five years on, that 'Wild West' claim appears still very much the default position for the crazy world of cryptocurrencies. My city financier buddy says he might check out the latest ISA savings account offers for a bit of personal financial security together with his sanity.
Cautious investors are increasingly questioning if it's right that they can freely buy something they cannot actually handle, as it's all done electronically. Crypto is a different world, especially when it comes to the frugal among us who still bemoan the banks removing the ability to draw a fiver out of an ATM on a rainy day. Remember when certain on-street machines would actually give you a pound note, enabling you to buy a lunchtime coffee and vanilla slice to go?
Former Reuters, Sunday Times, The Scotsman and Glasgow Herald business and finance correspondent, Bill Magee is a columnist writing tech-based articles for Daily Business, Institute of Directors, Edinburgh Chamber and occasionally The Times' 'Thunderer'