The Motley Fool

Here’s how to lose £100 million on Bitcoin

One of the big attractions of Bitcoin, at least according to those trying to ramp up its price, is that it’s unregulated. There’s no banking Big Brother keeping a track of your cash, and legal authorities can’t really touch it.

Who needs that? 

Maybe the people of Venezuela need it, as even cryptocurrencies are considerably more stable than their own Bolívar, while inflation is causing prices of basic goods to double every few weeks. In fact, the Venezuelan government has even tried to launch its own cryptocurrency, but I think that’s rather missing the point.

And then there are drug barons and money launderers, but I’m sure you’re not one of those.


When it comes to money, I see regulation as an undoubtedly good thing, as it provides security.

What would happen, for example, if the CEO of Lloyds Banking Group got hit by the proverbial bus on the way to work? Or the entire Barclays board of directors perished in a bizarre currency-hedging accident?

A bank could be pretty badly disturbed by such a tragedy. But all its money wouldn’t suddenly disappear and its customers wouldn’t become penniless overnight.

It can happen

It appears that’s exactly what can happen with cryptocurrencies. Would you believe that Canada’s biggest cryptocurrency exchange, Quadriga, had its funds under the sole control of one person, founder Gerald Cotten? And, yep, he just died. And nobody knows his passwords.

You serious?

After Cotten’s sudden death in India in December, nobody has been able to get their hands on the estimated C$180m (approx £105m) that’s under Quadriga’s control.

According to his widow, he carried out the company’s business on an encrypted laptop, and “despite repeated and diligent searches, I have not been able to find [his passwords] written down anywhere.”

Would you trust your money to an outfit that was managing more than £100m in such a comically incompetent way?

Is the money gone?

Well, it seems around 115,000 people are holding cryptocurrency balances in their accounts at Quadriga. Or rather, they were.

What seems especially inept is that the crypto-cash is apparently being held in what is known as a cold wallet. That’s a cryptocurrency store which is not connected online and provides a level of security from hacking attempts.

But they overlooked the massively bigger risk caused by only one person knowing that all-important password.

The biggest risk

Despite the risks of fraud, basic security incompetence, personal mistakes (like that guy who lost his Bitcoin stash when the old computer he stored it on was accidentally thrown out), the biggest risk with Bitcoin is… Bitcoin itself.

Though it has pretty much maintained its value so far in 2019, it still looks to me to be on a relentless slide. At $3,400 today, that’s a 70% loss since last March’s peak, and I just don’t see any comeback.

The real thing

No, if you want reliability, security and low cost in currency transactions, use a real currency backed by a trustworthy central bank. And if you want an investment, go for something that generates genuine new wealth. For me that’s shares, and I think we’re looking at the best stock market investment conditions for years.

You Really Could Make A Million

Of course, picking the right shares and the strategy to be successful in the stock market isn't easy. But you can get ahead of the herd by reading the Motley Fool's FREE guide, "10 Steps To Making A Million In The Market".

The Motley Fool's experts show how a seven-figure-sum stock portfolio is within the reach of many ordinary investors in this straightforward step-by-step guide. Simply click here for your free copy.

Alan Oscroft owns shares of Lloyds Banking Group. The Motley Fool UK has recommended Barclays and Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.