View From the Trenches: Investors Should Steer Clear of Cryptocurrency

In my book The Investor Protector, I share stories from my 25 years as an attorney representing investors who lost their life savings at the hands of financial advisors who lied, cheated or stole from them. In many instances my clients were enticed by promises from their trusted advisors that the investments being sold to them were “the next big thing.”

In my experience, the next-big-thing is often nothing more than a Potemkin village. Eventually, after Wall Street makes its money, exits the scene, and the once-impressive facade inevitably tumbles, it’s the retail investors who are left standing among the ruins, dismayed that it was all a deception.

These days, cryptocurrency seems to be the big craze. Despite all the get-rich-quick promises that many promoters push, I can tell you firsthand that regular folks are losing lots of money in crypto. My law firm gets frequent calls from crypto investors who have gotten burned by such things as massive short-term volatility in crypto markets and unexpected malfunctions on online (and unregulated) trading platforms. Unfortunately for crypto investors, I believe that this craze – like all investment crazes – will ultimately end very badly indeed.

Writer Hamilton Nolan has written a thought-provoking piece that is out last week, The Ticking Time Bomb of Crypto Fascism. I encourage everyone to read it.

Nolan provides an excellent overview of crypto and its inherent flaws as an ”investment” vehicle. In my view, Nolan is 100% correct when he notes that while they’re called “cryptocurrencies,” crypto is not really a currency at all: they are more akin to “collectibles, pure speculative objects with zero intrinsic value.”

Nolan also provides a dire prediction about how crypto’s inevitable collapse will further roil our already precarious political culture.

While I certainly don’t pretend to have a crystal ball, I agree with Nolan that the crypto market appears to have all the markings of a typical next-big-thing that is doomed to inevitably crash and burn. And like Nolan, I’m particularly afraid that many younger investors who have been most enticed by crypto’s allure are going to suffer the worst. I hope I am wrong but two decades of experience as an investment fraud lawyer informs me otherwise.

In my opinion, Crypto has no place in any sort of investment portfolio designed to provide for retirement. I agree with Nolan: crypto is an “imaginary asset class” comprising entirely of “inherently worthless online tokens.” Critically, if your financial advisor is encouraging you to buy crypto, then it’s time to get a new financial advisor. They do not have your best interest in mind and are instead steering you into a speculative bubble.