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One of the greatest financial loses of this century has been exposed once again with the FTX cryptocurrency bankruptcy in the United States.
Since the introduction of cryptocurrency in 2004 eight major losses of crypto have been recorded publicly. Total amount lost or stolen is over $900 million US.
The one scandal most Canadians might recall was in 2018 when Quadriga owner Peter Cotten died suddenly in India. He had the only password to the encrypted currency and investors lost $190 million US because the password was missing.
Some investors have insisted his body in India be exhumed to make sure he didn’t fake death to run away with the treasure.
Cryptocurrency speculation has made billions for some investors and lost billions for others.
Bitcoin is the best known of many varieties of cryptocurrency but all of them are like playing with Monopoly money. They require someone to pay more than the current owner for the crypto.
Cryptocurrencies are “mined’’ by massive computers digging in the cyberspace with complex mathematical formulae to find the encrypted currency.
The amount of any one cryptocurrency is supposedly limited giving them “value’’ through scarcity. Owners have to take the creator’s word for that limit.
The currencies of countries are backed by central banks and the wealth of the country. There is no such backing for cryptocurrency.
Cryptocurrency value is based on trust in the creator and hope of increased value on the market.
Since 2014 Bitcoin has gone from $461US to a high of $61,284 US in 2021, currently trading around $17,000.
Promoters of these alternative currencies insist they eliminate the need for bank clearing transactions, claim that they are private, hidden from prying government eyes, and are safely stored in cyberspace.
Hacker thieves have disproven the safety claim.
A United States government study in 2020 stated three main illicit uses of cryptocurrency are: criminal transactions; money laundering; theft.
Governments have been slow to regulate cryptocurrency with some minor regulations in the last few years as officials saw the cryptos as a challenge to control of monetary policy and threat to tax collection.
Eight countries including China have outright banned these fake currencies. Tiny El Salvador adopted bitcoin as the national currency.
The FTX bankruptcy was worse for the public as it involved a bank based on crypto. Losers included several national investment funds, $95 million by the Ontario Teachers Pension Fund and US quarterback Tom Brady.
FTX founder and ex-CEO Sam Bankman-Fried lost his $14 billion fortune and so-called investors lost an estimated $8 billion. Bankman-Fried had planned to give his fortune to charity. He has been charged with fraud.
Crypto supporters will point to lack of controls as FTX executives used depositors’ money to buy private real estate and spend lavishly. They still should not have had access to the cryptocurrency.
As long as there is hope of fast money, some investors will cling to this Monopoly money.
Ron Walter can be reached at ronjoy@sasktel.net
The views and opinions expressed in this article are those of the author, and do not necessarily reflect the position of this publication.
© 2022 MooseJawToday.com
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