Cryptocurrency Myths, Red Flags & Scams

Our main goal in starting The Crypto Realty Group has been to connect the public with real-world applications of cryptocurrency, particularly in real estate. But, in talking to people who are genuinely interested in crypto but are a little timid because of the barrage of mixed news that surfaces daily, I wanted to help you guys understand the truth as well as the pitfalls of investing.

I won’t lie. Crypto is volatile, but the returns can be very gratifying if you have the stomach to stick with it. Even with the events in China and the JPMorgan goofball, Bitcoin is still up 84% at the time of this writing than last year, and the Dow Jones is only up a little over 12%. And despite the drama, it’s beginning to rally again.

The biggest question I get asked from newbies is “Isn’t it illegal?” The answer is OF COURSE NOT. I wouldn’t risk my real estate license on ANY kind illegal activity, let alone create a startup, Facebook pages and Instagram profiles based on real estate and crypto trading (I mean, really?). I remember my first transaction involving Bitcoin: We went through hell trying to connect the dots with banks, escrow, and the seller’s side only to have the listing agent ask me the day before we were supposed to close, “Are you sure this isn’t a scam?” Sigh. No, dude. Three companies and 10 people aren’t in on a scam to buy a house in Manhattan Beach (although I’m sure there are some out there who have tried).

The Netflix documentary, Banking on Bitcoin, is a wonderful beginning to your quest for Bitcoin education, although it highlights some of the key people who DID end up going to jail because of illegal use. Criminals have been committing crimes with USD and every other fiat known to man since its inception, but that doesn’t make USD illegal. I could commit some serious crime using a pencil and a Hello Kitty eraser, but it’s not Hello Kitty’s fault, now is it? You get the point.

Crypto may have taken a tumble this week due to some recent news, but it’s not going to stay there. So, I can’t emphasize enough for you to get out there and buy, but here ARE some things to look out for in your pursuit of riches and anonymity:

MYTH: Crypto isn’t backed by anything and therefore is worthless.

No. It’s worth what we say it’s worth, just like USD. USD used to be backed by gold, but USD and gold had a tumultuous relationship over the years and finally in 1970s, Nixon well, nixed the idea. So, USD is much like crypto in that WE, the traders, place value on the currency, but unlike USD, Bitcoin has a market cap (16M in circulation and 5M in reserve) and will only increase in value over time.

MYTH: I can’t spend my Bitcoin anywhere.

Nope. More and more retailers are accepting Bitcoin. In fact, I just bought a cute pair of flats and some earrings from Overstock.com. Japan has MALLS full of vendors who accept Bitcoin. Here is a list of some current merchants who accept Bitcoin according to 99Bitcoins.com:

Microsoft

Reddit

Wikipedia

Dish Network

Overstock

Virgin Galactic

Steam

Mint.com

Subway

Expedia

Etsy Vendors

Inuit

Microsoft

Newegg

PizzaForCoins.com

Lionsgate Films

MYTH: Tupac is alive.

No, man. I miss him too. Get over it.

Red Flags

I’ve met people who have bought a few Ether and now they’re blasting all over Social Media about their expertise. There are also “startups” out there touting that they’re the ones who can help you get rich. If you see a profile pic from The Wolf of Wall Street with some dude’s head photoshopped onto DiCaprio’s telling you to give him money to invest in crypto, RUN AWAY. 

Okay, these are the obvious ones. If you’re new to crypto and want to buy, take the time to do your own research. Blockgeeks.com is an amazing website for beginners as well as pros. Know the difference between Coinbase and Gemini, Kraken and Bittrex, Blockchain and Trezor. just to name a few. Hell, there’s even a Bitcoin for Dummies book. There are about 900 coins out there with new ones added all the time – unless you have an amazing memory I don’t expect you to know all of them, but just familiarize yourself with the top few.

When you become a little more savvy, you can begin to diversify. My buddies at MT Digital Assets are a completely legit crypto hedge fund worth checking out. They’re knowledgeable and watch the market just like any good portfolio managers do (and should).

Scams

You bet they’re out there. Just as the great Nigerian scam artists popping up in your inbox or calling you posing as the IRS claiming your account is in violation and they need your info asap (my response was, “You’re the IRS, you should already have my personal information.” And the nice man on the other end replied, “Have a nice day, bitch.” – yeah, that happened).

The biggest hurdle in buying real estate with crypto is producing proof of funds. To me, if a buyer has no problem using a third party to verify they have X amount of crypto equaling the purchase price, then we’re good to go. If they give any pushback or are unable to verify for whatever reason(s), then there’s a big problem (see Red Flags).

Here are some known scams to look out for:

  1. Anyone cold calling you. Police in London just shut down a ring back in August in which the scammers were calling investors to put money in cryptocurrencies that didn’t exist. Bad.
  2. Ponzi Schemes. According to com, the LFC Coins & the Centurion Coin are all about that. This goes back to doing your homework if you get a “hot tip” on a new ICO (Initial Coin Offering). Ponzi Schemes are prevalent in the altcoin world because there is no bank account needed and no products sold other than the altcoin itself.
  3. Pump and Dump. Gosh, sounds familiar, doesn’t it? #WallStreet Just in August the SEC issued a warning on ICO scams by public companies. With much hype, investors pump millions of dollars into the “next big ICO” on crypto platforms inflating the price, then sell off at the peak.

For more information, please feel free to contact me at piper@thecryptorealtors.com or follow us on Facebook.