The cultural trend of retail investors to get into the market searching for higher returns is the biggest pain point for cryptocurrencies. 

The FOMO or fear of missing out triggers many to get into the market whenever they get a chance. Such a stance often does more harm than good to their portfolio performance.

Amid this fiasco, some campaigns say, ‘There’s a price to waiting, especially when it comes to crypto.’ 

Can the operators be a little more responsible? What is the advertisement watchdog’s stance? How do retail investors protect themselves?

The Current Market

The prevailing situation has an amalgamation of factors that lead to a rapid drive in the market. Statements by the marketers that applaud greed or put forth the fear of FOMO bring in retail investors who are unaware of the market conditions. The media coverage or word of mouth about the outsized gains have also paved the path.

Recent researches suggest that the knowledge possessed by the majority of the investors of crypto is notional or very poor. Most of them are unaware of the crypto operations even after having an investment.

The lockdown ulterior time saw a rise in investments in not only crypto but other dog token and meme stocks as well. The careful paraphrasing of Robinhood lingo such as ‘democratization of finance’ has been at the center of such campaigns.

The Inherent Risk of Cryptocurrency

The lack of knowledge about cryptocurrencies, the absence of established players, and market regulators have often led to cryptocurrency scams in the past. There have been various scams from the inception of cryptocurrencies. 

Mining is the process through which cryptocurrency creation takes place. The initial crypto scams saw the scammers using this as a route. The mining investment projects for passive income led to many losing their money.

The cryptocurrencies remain in digital wallets. They have two keys to operate – a private key and a public key. The public key acts like an address for the digital account. The private key is what gives you access to transact with your Bitcoins. Companies with virtual wallets sought details of the ‘private key’ from the users. These cryptocurrency fraud schemes then rip off such wallets.

Taking a cue from the share markets, cryptocurrencies also have pump and dump scams. An investor or an entity with a high cash flow buys the cryptocurrencies in bulk. Then they create hoax news about the crypto across various social media. The operators dump the stocks at the peaks, leading to a loss sustained by the smaller players.

Pyramid cryptocurrency scams are similar to Ponzi schemes in other markets. The difference being the scammers use the news of the crypto price appreciation to fool the investors. Initial Coin offerings or ICOs similar to IPOs have led to many scams. The owners of the coins, garnering traction for the coin via false promises, later dumping at highs ripping off several investors.

These have given rise to specific crypto scam recovery services. These companies help recover the funds of the investors lost by such unscrupulous means. Based on their experience with such scams, they perform initial checks to understand the merit of the cases. 

The collection of information and documentation on the case helps put strong evidence to back the case. They challenge the entities that have siphoned your money to get it back.

The Watchdog’s Stance

The recent development of the U.K. Advertising Standards Authority (ASA) planning to strengthen its efforts to supervise crypto marketing may be a significant first step. 

The advertising regulator will be identifying the advertisements which are misleading or irresponsible. The absence of regulation has allowed a free space for crypto marketers, where they put big claims that lack data for substantiation.

The regulator’s efforts will be primarily directed towards social media networking platforms. Currently, most of the companies operating in this space are using such mediums to propagate their agenda. The absence of disclaimers or warnings on the downside of the crypto investment is affecting many retail investors.

Miles Lockwood, the director of ASA’s complaints and investigations department, says that the regulator identifies crypto as a ‘red alert.’ Until July 2021, the regulator has taken a reactive stance. The rising number of complaints has led them to scrutinize and look into these campaigns. 

So, the coming days will tell us what will be the impact of such regulations. It is also important to note that if you as an investor are more informed and exhibit caution during such transactions, chances are your money can still be safe.