Who’s ever lost money in cryptocurrency? Well, everyone has at some point, but these people did it in a spectacular fashion. Let’s look at the top 5 worst investments in cryptocurrency history and what you can learn from them to make sure you don’t make the same mistakes!
Top 5 Worst Investments in Cryptocurrency History
Number Five – The DAO
The DAO was designed to make investment funding more democratic, allowing investors to use smart contracts to vote on what projects would receive funding. The program raised $150 million before disaster struck; hackers took advantage of flaws in its code and siphoned off tens of millions worth of investor money.
Despite a hard fork that allowed investors to recoup their losses, it’s clear that The DAO was a bad investment. It will likely go down as one of the worst cryptocurrency investments ever.
The DAO was an ambitious idea, aimed at democratizing how startups were funded by allowing people to vote on whether a project should receive funding. Unfortunately, its code was found to contain flaws and it ended up losing tens of millions of dollars worth of Ether.
A hard fork followed, allowing investors to recoup their losses. Although The DAO is no longer around, it’s considered one of cryptocurrency’s biggest blunders.
Although The DAO is no longer around, it’s considered one of cryptocurrency’s biggest blunders.
With The DAO, investors would buy tokens to fund different projects. These tokens would then allow them to vote on which projects should receive funding.
To encourage voting, investors were given rewards in Ether after each successful vote. The DAO’s code contained a flaw that allowed hackers to siphon off tens of millions of dollars worth of Ether by attacking it through smart contracts. This hack led to a hard fork that created Ethereum Classic (ETC).
Number Four – Mt. Gox
The fall of Mt. Gox was a major blow to bitcoin, said ShapeShift founder and CEO Erik Voorhees. It’s incredibly embarrassing for everyone involved, but it does make for a great story… You can never be too careful when investing in cryptocurrency history.
Indeed, users who purchased bitcoin through Mt. Gox—which at one point handled over 70 percent of all bitcoin transactions—are still waiting for their money as support tickets pile up and customer complaints go unanswered.
In 2014, hackers broke into its servers and made off with 850,000 bitcoins valued at $450 million at the time.
The company at first claimed it was operating under bankruptcy protection, but then revealed it had lost 850,000 bitcoins.
Because of that scandal and other security issues, Mt. Gox ceased operations and filed for bankruptcy protection from creditors in Japan and America.
Since then, little information has been released about its assets or what happened to customers’ money. Today marks a grim anniversary for one of bitcoin’s oldest exchanges: March 7th, 2014 marks three years since Mt.
Gox halted all trading and customers were no longer able to log into their accounts. Today, it remains a blank page except for a brief message: In light of recent news reports and the potential repercussions on MtGox’s operations and the market,
a decision was taken to close all transactions for the time being in order to protect the site and our users. We will be closely monitoring the situation and will react accordingly. The second you purchase bitcoin from Mt.
Number Three – Bitconnect
In January 2018, co-founders of Bitconnect, Divyesh Darji, and his brother, have been charged with fraud by Indian police. They are accused of luring investors to purchase BCC tokens from them.
The price of BCC jumped from around $4 to about $400 for a single token before crashing back down to under $2. In total, BCC raised over $3 billion during its existence.
These accusations and investments by Ponzi scheme experts are not surprising considering that many people who purchased BCC tokens were promised outsized returns on their investment if they simply held onto it rather than trading it back and forth with other users or converting them into cash.
However, one of these people who invested heavily in Bitconnect is an unnamed 23-year-old German man. He reportedly sunk $55,000 into BCC and he watched as his investment dropped to just a few hundred dollars.
He then attempted to sue Bitconnect for his losses but failed to receive any kind of compensation from them since they blamed him for not properly researching their product prior to investing.
Number Four – Paycoin: Launched back in 2014 by Josh Garza, Paycoin was marketed as the next big cryptocurrency by a massive Ponzi scheme with numerous red flags.
Number Four – Paycoin – Second Paragraph: A Ponzi scheme is where you are promised outsized returns on your investment if you convince more people to join and pay into it. When I say outsized, I mean that they were promising users that they would receive anywhere from 30% to over 100% per month on their investment.
Number Two – Aurora Coin
When 2013 began, there were few cryptocurrencies on the market. At one point, there were only three – Bitcoin, Litecoin and PPCoin. But many others entered into existence during 2013 and 2014 as cryptocurrency investors scrambled to get their hands on any currency that could offer them a return on investment.
One of those was Aurora Coin (AUR), which launched in September 2013 but got its fair share of hype from early investors who believed it had a lot of potential for growth because it shared some similarities with two popular currencies: Ripple and Stellar.
Aurora Coin made some pretty grandiose claims, promising to be a secure currency with low transaction fees and guaranteed growth. It was even designed to make micropayments for small purchases easy, which no other cryptocurrency had been able to accomplish.
However, things went downhill from there, starting with its choice of Proof-of-Stake (PoS) as its security model. This form of consensus allowed investors to earn coins simply by holding onto them
– instead of having their computers verify transactions – which gave it one of its biggest criticisms: Aurora Coin quickly became very centralized because a handful of people owned a large proportion of all coins.
Number One – Apple Stock Appreciation Index Fund
Between Jan. 1, 1996, and Dec. 31, 1997, investors that put $1,000 into Apple (AAPL) stock saw their investment grow to $5,507—an astounding return of 2,545 percent. The problem is that few people actually bought AAPL;
instead, they invested via a fund that tracked AAPL’s price movements and paid dividends when it increased in value. When AAPL dipped, so did their profits… just like all other stocks on the Nasdaq index did during what is now known as the dot-com bust.
This meant investors lost most of their money even though Apple itself was unaffected by the crash and had even become profitable for some time after Jan. 1st, 1996.
AAPL eventually rebounded and investors who put their money directly into Apple’s stock instead would have experienced huge profits. Instead, those who bought via an index fund with Apple as its primary holding suffered huge losses and had to wait years for them to recover—meaning they lost out on some of AAPL’s biggest gains.
Number Two – The Pet Rock: There was a brief moment back in 1975 when it seemed like everyone wanted a Pet Rock; more than six million were sold during that year alone.
It’s important to take your time and do your due diligence before investing in any cryptocurrency. It doesn’t have to be rocket science, just make sure you analyze everything properly, read all available documentation, and ask around.
If you’re still feeling nervous about it – feel free to invest a small sum of money first and work your way up as you gain confidence that it’s a legit project. These are just some of the most well-known scams/bad investments out there. Just make sure to avoid them!
And if you’re planning on investing – good luck! Make wise choices!
With that being said, let’s dive into our list of the top 5 worst investments in cryptocurrency history. To qualify for making it on our list, a cryptocurrency had to fail spectacularly with regard to being a viable store of value or medium of exchange.
We also considered how harmful its failure was to both investors and the adoption of cryptocurrencies as a whole. Here we go!
#5 – Exchange Rate Game. While cryptocurrencies have much lower transaction fees than credit cards, they are still a significant cost of owning a cryptocurrency. Bitcoin currently sits at around $1.6 per transaction,
which can get very pricey when you want to do small transactions that are not worth paying in full with BTC, such as paying someone back for coffee or buying lunch.
The idea behind Exchange Rate Game was to circumvent these high transaction fees by issuing an altcoin (UTXO) that could be freely exchanged on OpenLedger with any other crypto asset on its platform – no transfer fees required! Their initial ICO targeted buyers outside of the cryptocurrency space and didn’t receive much attention.