“Invest €250 and earn more than €10,227 a month!“
That was in an email I just received, and it told me “Libra is shaking up Bitcoin” and that it will lead to “excellent prospects for those who choose to invest in cryptocurrencies.”
Putting aside the curiously specific figure of €10,227, you don’t need me to tell you that no, you’re not going to start earning tens of thousands per month from such a small investment. Or that you should not click the “Get started now” button.
It’s interesting that this message works up from a half-truth to try to engage the reader. Yes, Facebook‘s Libra could shake up the cryptocurrency world – if it ever gets off the ground, and that’s very much up in the air right now. But that doesn’t mean it will provide excellent prospects for cryptocurrency investors.
Crypto promotions seem to be getting more pushy and more outlandish in their predictions, and that’s the kind of thing that happens when dodgy investment promotions are running out of steam. It’s another good reason to keep your investment money well away from Bitcoin and other cryptocurrencies.
If cryptocurrencies themselves aren’t risky enough as investments, there’s an array of crypto-backed derivatives being touted for sale too. Derivatives based on genuine investments, like options, futures and the rest, are risky enough, especially for private investors. But when it comes to crypto derivatives, the underlying assets themselves are so dodgy that you’ll have guessed by now that I wouldn’t touch them with a bargepole.
The Financial Conduct Authority (FCA) seems to think so too, saying in July that such instruments are not suited to retail investors who are not able to reliably assess the underlying asset values and risks.
The FCA is right, because nobody can reliably assess such things when we’re talking about cryptocurrencies.
The FCA is proposing bans on the sale of such derivatives to retail investors. And while I usually oppose authorities telling me what I can and cannot invest in, I wholeheartedly support this initiative – anything that helps bring forward the end of the Bitcoin bubble is good in my books.
The various exchanges offering trades in crypto derivatives are opposed to such intervention and are urging the FCA to back off. Well, they would wouldn’t they? Just like snake oil salesmen would oppose restrictions on reptile-based lipids.
As for Libra, enthusiasm is waning, as Mastercard, Visa, and eBay have now dropped out, while financial regulators are putting increasing pressures on the project.
What does all this mean for investors? Blockchain itself is definitely an impressive development, but using it to implement currencies is only the first big idea for its use. There will, I’m certain, be very good uses for blockchain technology in the future, but I’m not sure if currencies will make it – there are very good reasons for relying on our well-developed central banking systems.
As an investment medium, I remain convinced that cryptocurrencies are simply madness and will provide mostly pain for those who put any cash into them.
As always, I remain convinced that shares on the world’s top stock exchanges are by far the best investments there are. You can learn more by following the links below.
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Facebook, Mastercard, and Visa. The Motley Fool UK has the following options: long January 2021 $18 calls on eBay. The Motley Fool UK has recommended eBay. 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.