The cryptocurrency market, which over the past decade has transformed from a hobby of enthusiasts into a global financial phenomenon with a peak capitalization of $3 trillion, turned out to be an illusion built on greed and endless promises of quick wealth. Millions of people participate in this gigantic game, but only a few win.
1. Great promises and unabashed reality.
At the dawn of their emergence, cryptocurrencies were portrayed as a tool for liberation from the banking system and centralized financial institutions. However, just a few years later, it became clear that most cryptocurrencies represent no real value.
According to a study by CoinMarketCap, over 80% of all cryptocurrency projects that existed from 2014 to 2023 turned out to be either abandoned or closed after fundraising. The total losses for investors in such schemes over the ten years exceeded $50 billion. Instead of a 'financial revolution', people received a new form of a pyramid scheme, only now digital.
2. Crazy volatility: price spikes that drive you crazy.
Cryptocurrencies are known for their volatility. Even the largest ones, like Bitcoin and Ethereum, can lose half their value in just a few weeks. This instability makes them unsuitable as a means of exchange or store of value.
Let's look at the price dynamics of Bitcoin over the past few years:
2017: rise from $1,000 to $19,000 in a year, then falling to $3,000 by the beginning of 2019.
2021: rise to a record $64,000 in spring and fall to $29,000 by summer.
2022: after a brief rise to $48,000, Bitcoin fell below $20,000 by the end of the year.
Such a level of volatility makes the market attractive for speculators but extremely dangerous for long-term investors.
3. Altcoins: a million ways to lose money.
As of 2023, the number of different cryptocurrencies exceeds 24,000, but the vast majority of them have no real value. Altcoins are often issued to quickly raise funds from investors, after which the projects shut down, leaving holders with devalued tokens.
There are so many scam examples that a whole list of the largest fraudulent schemes can be compiled:
1. BitConnect - the largest pyramid scheme in the history of cryptocurrencies. Investor losses amounted to $4 billion.
2. OneCoin - a scam that affected more than 3 million people worldwide, with total losses of about $4.4 billion.
3. SaveTheKids - a scam disguised as charitable purposes. Investors lost over $10 million.
4. Pincoin and iFan - related projects that raised $660 million and disappeared.
5. Squid Game Token - a token that soared by 75,000% and crashed to zero in a day.
6. PlexCoin raised $15 million from investors before closing.
7. Centra Tech - a project that raised $32 million turned out to be a fraud. The creators were arrested for fraud.
8. AriseBank promised a decentralized bank but disappeared with $600 million.
9. LoopX - the project raised $4.5 million, after which its developers deleted the website and fled.
10. NanoHealthCare Token raised $20 million under the pretext of creating a medical platform and closed down.
According to CipherTrace data, from 2016 to 2022, cryptocurrency scammers withdrew more than $15 billion from circulation solely through such schemes.
4. Environmental disaster: mining as a weapon of mass destruction.
Cryptocurrency mining, especially Bitcoin, has become a serious environmental problem. The Bitcoin network consumes about 140 TWh of electricity annually — more than the annual consumption of Argentina or Sweden.
According to a study by the University of Cambridge, about 39% of this energy comes from renewable sources, but the remaining 61% comes from coal, oil, and gas. As a result, carbon dioxide emissions from Bitcoin mining in 2021 amounted to 65 megatons of CO₂, comparable to the emissions of countries like Greece or the Czech Republic.
Why is this profitable?
Despite the obvious harm, mining continues to develop. The reasons for this are as follows:
1. Profit for energy companies. In regions with an excess of cheap energy, companies have the opportunity to sell electricity at inflated rates to miners, which brings them additional profit.
2. Tax benefits and subsidies. In some countries, governments provide incentives for miners, seeing this as a way to attract investment. For example, in Kazakhstan and Iran, miners receive subsidized electricity.
3. Job creation. Although the number of jobs in the mining sector is relatively small, in some regions, mining farms have become important employers.
4. Control over the cryptocurrency network. Miners with significant power can influence the network, including the adoption of new rules and protocols.
Thus, the interests of large energy companies, governments, and private players create sustained demand for mining despite its destructive impact on the environment.
5. Who made money, and who was left empty-handed?
In this crypto story, there are clear winners:
1. Cryptocurrency exchanges: in 2021, the combined profits of the largest exchanges exceeded $60 billion.
2. Token creators: founders of projects like Ethereum made fortunes measured in billions of dollars.
3. Major miners: companies like Bitmain and Riot Blockchain earn hundreds of millions of dollars annually.
But there are far more losers in this story. Research shows that over 80% of retail investors who entered the market after 2020 lost money.
Cryptocurrencies did not become a tool for financial freedom. Instead, they turned into a playground for scammers and speculators, harming both people's financial well-being and the environment. Only those who entered the game first or created the rules that others play by profited. The rest, as usual, were left empty-handed with shattered dreams of easy earnings.