Devastated Australians say they have lost everything after investing in cryptocurrency with some seeing their marriages breakdown and others left contemplating suicide.
The investors admitted they regretted their decision to buy digital coins after several crypto firms collapsed this year, most notably FTX last week.
Bitcoin and other cryptocurrencies have collapsed in the wake of FTX’s crash, with more than $US150 billion wiped off the value of the top 10 digital coins.
FTX founder Sam Bankman-Fried, once hailed as the ‘poster boy’ for crypto with a net worth of $15 billion, has seen his wealth evaporate and faces reported federal probes into his company’s handling of customer funds.
The dramatic fall of FTX has led to increased concerns about the reliability of centralised exchanges.
On Monday, Aussies began pulling money from Singapore-based firm Crypto.com amid questions about the currency exchange’s handling of a $400USD million transfer.
‘Crypto.com making an accidental transfer of $400 million at a time when there is extreme fear in the market around the solvency of exchanges is not a good look for the exchange,’ said Marcus Sotiriou, an analyst at the publicly listed digital asset broker GlobalBlock.
US expert Jim Cramer has also warned investors should ‘cash out of crypto while they can’ after the collapse of FTX.
The firm, which had been valued at $32 billion, filed for bankruptcy on Friday amid concerns it had misappropriated customer funds.
Now, some Aussies have opened up on their despair after investing in crypto.
FTX founder Sam Bankman-Fried (left), once hailed as the ‘poster boy’ for crypto with a net worth of $15 billion, has seen his wealth evaporate
Bitcoin continues to struggle after its value dipped following the collapse of the FTX exchange
US expert Jim Cramer has warned investors should ‘cash out of crypto while they can’
After cryptocurrency platform Celsius Network failed in August, many Australians were unable to access their funds deposited on the network.
One said: ‘I am a female client from Australia with crypto deposits on the Celsius Network.
‘Similar to many other retail investors, I and my family are severely impacted both in financial terms and mental health by the bankruptcy and locked up funds.
I am expecting my third child in 2.5 months and need the money to pay for the doctor, hospital and expenses.
‘Also, my aunt is seriously ill and needs my financial support for her major operation.
‘However, all of my savings have been tied up in the Celsius network. I was planning to withdraw from Celsius to fund my birth and my aunt’s operation in late June, but due to the withdrawal halt, I don’t have access to any funds and my life has become so miserable now.
‘I am worried that my stress due to Celsius’s situation will affect the health of my unborn child. Also, my two other children are still in primary ages and my family also need to fund locked in Celsius for their education.’
Another Aussie said: ‘I had 95% of my life savings in Celsius as I was made to believe that it was a safe and secure account where I could earn 1% interest on my bitcoin.
‘I have suicidal thoughts and the only reason I hadn’t already taken my life was the burden that would leave my family.
‘I have lost 15% of my body weight in 6 weeks from the stress of suddenly losing everything that i’ve spent my entire life building.
‘Worst of all, my mother split my home with me so if I default on the home she’ll be homeless at 60 years of age. I just don’t see a way where I can recover.’
A 40-year-old father-of-three added: ‘This has had an immense impact on my life and my financial future looks extremely grim.
‘I feel humiliated, angry, anxious and have had many sleepless nights coming to the realisation the all my funds I have been saving for my children’s future for the past 20+ years has been gambled away by a liar and a fraud.’
Crypto Queen Queenie Tan (pictured) says she is moving away from crypto – now with less than 10 per cent of her investment portfolio in cryptocurrency
Ms Tan said she invested ‘more than I was willing to lose’ and now counts crypto as only ‘five or 10 per cent of my portfolio’
While a 42-year-old single parent said: ‘My job involves very heavy lifting, working in extreme weather conditions here in the far north Queensland tropics, and very long hours given the lack of people in my sector up here.
‘The plan was to work a ridiculous amount of hours and live in a very cheap run down property to maximise savings. The end game was to buy a house for myself and my child.
‘I have no family over here and nobody to fall back on so I had to come up with a plan. I have lost everything. How can I explain this to my son? I feel ashamed at myself.’
David Gerard, an author and crypto expert, said a lack of regulation has doomed the industry and said everyday Australians will be the victims of the latest crash.
‘We have to think about the real victims, the mums and dads, the grannies who think their retirement should go into crypto. There’s a real human cost here and that’s the ordinary people who get scammed,’ he told 60 Minutes.
‘You can’t get rich for free. You’d think that was obvious, but people keep hoping there’s a way out and that they’ll get ahead, but it’s always a false hope. Some people do great but more people get absolutely wrecked.’
He said anyone who started investing in crypto in the last six months have instead been sold ‘magic beans’.
Kyle Stagoll gave up a career in modelling after striking it big with crypto – but admitted none of his portfolio are currently in coins due to the bear market
Australian investors have opened up on the struggles they are facing following the collapse of several cryptocurrency firms this year
‘They’re trying to work out how to offload them. A lot of them are just going to have to take the hit and it’s not going to be nice,’ he said.
Queenie Tan, from Sydney, said her financial success gradually accumulated over time after she started researching and investing when she was 19.
Ms Tan, who runs the popular finance page, Invest with Queenie, entered the market in 2017 and immediately bought into the hype, admittedly getting carried away with the excitement.
‘I thought I was a genius – ‘I’m going to be a billionaire by the time I’m 30′, but unfortunately that didn’t happen,’ told Daily Mail Australia.
‘I invested more than I was prepared to lose, I was swept up in the euphoria.’
Now worth more than $500,000 – Ms Tan said she lost 90 per cent of her portfolio during the crash of early 2018, and while she is not giving up on crypto altogether, she is chastened by the experience.
‘It still has a future but it takes a while. Now, because of that experience, I only invest money I’m prepared to lose. I’m definitely more humbled,’ she said.
Kyle Stagoll, a Melbourne-based model-turned crypto king, has pulled all of his money out of the digital currency.
He said buying the dip while in a bear market, a decline of 20 per cent or more from recent highs, as opposed to a bull market, a 20 per cent or more increase of recent highs, is ‘foolish’.
‘HODLing is only for bull markets, in bear markets HODLers are exit liquidity,’ he told Daily Mail Australia.
HODLers is a crypto slang term to describe a strategy used by buy-and-hold traders, rather than people buying and selling with every dip.
The CEO of Binance, the world’s largest cryptocurrency exchange, warned that troubled sector faces ‘cascading effects’ after the implosion of major rival FTX.
With these type of events happening, its devastating for the industry. A lot of consumer confidence is shaken, and I think basically it sets us back a few years,’ added Zhao.
‘With FTX going down, we will see cascading effects,’ said the Binance CEO. ‘Especially for those close to the FTX ecosystem, they will be negatively affected.’
Zhao predicted that the crypto industry will likely face more regulatory scrutiny focusing on capital requirements and handling of deposits, adding, ‘which is probably a good thing, to be honest.’
Last year, Barefoot Investor Scott Pape said that with more than 7,000 types of digital coin in existence, most of them would end up being worthless.
‘Let me be clear: I am sure that a handful of these will be genuinely transformational – don’t ask me which ones,’ he said in a blog.
‘And I’m also just as sure that the vast majority of these coins will end up being worth digital diddly squat.’
The Barefoot Investor Scott Pape (pictured right) has warned of the dangers of cryptocurrency
All you need to know about cryptocurrency: How do you use it? Why is it popular?
What is cryptocurrency?
A cryptocurrency is a decentralised digital currency that can be used for transactions online.
It is the internet’s version of money – unique pieces of digital code that can be transferred from one person to another.
Unlike centralised currencies such as the Pound Sterling or the U.S. dollar, there is no governmental authority that manages cryptocurrencies or how much they are worth.
All crytocurrencies use what is known as blockchain technology – an open ledger that records transactions in code.
Explaining the blockchain, crypto expert Buchi Okoro told Forbes: ‘Imagine a book where you write down everything you spend money on each day. Each page is similar to a block, and the entire book, a group of pages, is a blockchain.’
The blockchain allows all records of transactions to be recorded and checked to prevent fraud.
Bitcoin is the most popular cryptocurrency. It was created in 2009 by a person or group of people going by the name of Satoshi Nakamoto. Nakamoto has never been identified, although Australian businessman Craig White claims to be the man behind the pseudonym.
The supply of bitcoins is carefully controlled – no one will ever be able to create or issue new coins at will.
There will also never be more than 21million bitcoins, whilst each coin is itself divisible into 100million units that known as Satoshis. This stops the erosion of value – inflation – that plagues national currencies.
How do you buy them?
Cryptocurrencies can be bought on what are known as exchanges, with Coinbase and Bitfinex being among the most popular.
Exchanges allow ordinary people with little knowledge of the technical aspects of cryptos to buy them simply. The exchanges allow traders to buy fractions of coins rather than whole ones.
It means they can spend as little as much as they like – rather than forking out what could be tens of thousands of pounds if they were to buy a whole coin.
However, most exchanges charge a fee to invest. Generally, this is a small percentage of the amount of crypto purchased, along with a flat fee depending on the size of the transaction.
In the UK, Coinbase charges a 3.9 per cent fee for orders over £200 that are bought using a debit card.
Purchases through a UK bank transfer incur a smaller 1.4 per cent commission.
What can you use cryptocurrencies for?
Cryptocurrencies can be used to make purchases and to send money abroad easily. However, at present, most retailers do not accept the likes of bitcoin as a form of currency.
One way to get around this is to exchanging cryptocurrencies for gift cards that can then be used at ordinary retailers.
Crypto debit cards can also be used to make purchases. The cards are preloaded with a cryptocurrency of your choice.
Whilst the user spends their cryptocurrency, the retailer will receive ordinary money as payment.
Cryptocurrencies are also increasingly regarded as a form of investment, although experts caution about their volatility.
Bitcoin has long been referred to as ‘digital gold’ because of the fact that, like the precious metal, it is regarded by some as a good store of value.
Why are cryptocurrencies popular?
Cryptocurrencies are popular in part because they remove the role of central banks and governments from the supply of money.
With cryptos such as bitcoin, there is a fixed number of coins that ever be produced, which supporters claim makes them invulnerable to inflation.
There is no central authority that suddenly devalue the currency by producing many more coins.
Another reason for their popularity is the fact that whilst governments can freeze bank accounts or even confiscate money from individuals, cryptocurrencies generally remain out of their reach. This has however made cryptos such as bitcoin also popular with criminals wishing to hide assets from authorities.
Cryptocurrencies are also popular because there is no need to open a bank account to start trading them.
A final aspect contributing to their popularity is of course the ability to make large amounts of money investing in cryptocurrencies.
As an example, despite its recent plummet, bitcoin has still risen in value by nearly 11,000 per cent since its 2009 creation.
Can you make money from cryptocurrencies?
In short, the answer is yes. But the same is also true in the reverse.
As has been proven by their recent plummets in value, cryptocurrencies such as bitcoin and Ethereum are very volatile.
As an example, whilst bitcoin was trading at around $1 per coin in its very early days, it went on to peak at more than $60,000 in November last year.
Over the course of 2020, bitcoin nearly quadrupled in value. It then plummeted in the summer of 2021 before reaching its peak.
But since the turn of the year, it has lost more than half of its value once again.
As a result, many experts advise ordinary investors to stay away from cryptos in favour of more stable investments.
Are there any crypto billionaires?
According to Forbes, there are 19 individuals in the world who have become billionaires through cryptocurrencies.
The richest is Canadian citizen Changpeng Zhao, is said to be worth $65billion. He is the founder of Binance, which is the largest cryptocurrency exchange in the world when measured by daily trading volume. Zaho also owns a relatively small amount of bitcoin himself.
Other crypto billionaires include Sam Bankman-Fried, the founder of FTX, which is another cryptocurrency exchange. He is believed to be worth an estimated $24billion. As well as owning half of FTX, he also owns $7billion of FTT, FTX’s native cryptocurrency.
Coinbase founder Brian Armstrong has also become a billionaire, with a net worth of $6.6billion.
A third individual to have made money from the world of crypto is Gary Wang, who is the co-founder of FTX. Before his foray into cryptocurrencies, Wang was an engineer at Google. He is worth around $5.9billion.
What is Bitcoin mining?
People create bitcoins and other cryptocurrencies through what is known as mining.
Mining is the process of solving complex math problems using computers running bitcoin software. These mining puzzles get increasingly harder as more bitcoins enter circulation.
Each time a puzzle is solved, a new groups of transactions – known as blocks – are added to the blockchain (the shared transaction record). Miners are rewarded by being issued with bitcoin.
However, mining is now out of reach of most ordinary people because of the immense cost involved.
Spencer Montgomery, founder of Uinta Crypto Consulting, told Forbes: ‘As the Bitcoin network grows, it gets more complicated, and more processing power is required. The average consumer used to be able to do this, but now it’s just too expensive.’
Bitcoin mining also uses an enormous amount of energy, estimated to be around 0.21 per cent of all the world’s electricity.
This is similar to the amount of energy used by Switzerland each year.