KEY POINTS
- Crypto scams raked in $679 million in just six months of 2024.
- Bitcoin’s legit, but scammers love using it.
- Stick to reputable exchanges if you’re curious about Bitcoin.
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When one of the best money managers to ever live says you’re being scammed, you perk up your ears and listen. On the podcast Invest Like the Best, Charlie Munger of Berkshire Hathaway — widely known as Warren Buffett’s right-hand man — calls Bitcoin, the most popular cryptocurrency in the world, a scam.
He’s wrong. Though cryptocurrency scams are common and growing more common, Bitcoin is a well-established technology that underpins legitimate business. Like the U.S. dollar, the currency Bitcoin is a tool that can be used by both scammers and average Americans.
The following is a brief introduction to why Bitcoin is confused as a scam, why there are some very good reasons to shield your eyes and ears from Bitcoin advertisements, and why Charlie Munger has unfairly conflated Bitcoin with the worst of the crypto universe.
Cryptocurrency scammers are thriving
Americans lost $679 million to scammers via cryptocurrency in the first half of 2024. A quarter of all cash lost to scammers over that period was a result of a crypto transfer, behind only bank transfers, according to the Federal Trade Commission (FTC).
I don’t need to stumble across bad YouTube videos shilling claims like “Elon Musk wants your donations” to understand that crypto scammers are thriving. The numbers check out. Scammers are using crypto to rob people of their money. Typically, by posing as savvy investors.
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Most cryptocurrency scams are investment scams
Crypto is especially common in investment scams, according to the FTC. In 2023, Americans lost over 10 billion to fraud, 4.6 billion of that to investment scams. About 1.4 billion dollars of lost money was transferred to scammers via cryptocurrency, mostly Bitcoin.
Why do investment scammers like Bitcoin? Two reasons:
- It’s tough to reverse Bitcoin transactions.
- Bitcoin doubles as both currency and investment.
What crypto fans call “pros” are exploited by scammers, who take advantage of confusion to rob people. It’s a good reason to not trust social media strangers with your money.
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Bitcoin needs no advertisement
You can safely avoid going through third parties to invest in Bitcoin. Bitcoin isn’t difficult to invest in. You can do so swiftly through apps like Coinbase and Robinhood, purchasing it much like you would shares of stock. Many “money managers” are scammers.
Red flags to look out for:
- People on social media claiming they’re Bitcoin Jesus, able to predict the next coming of Bitcoin at $100,000, $1,000,000, or other price points.
- People who request you deposit Bitcoin into a bank account or crypto wallet that you don’t have access to, for any reason.
I wouldn’t trust Satoshi Nakamoto themself to accurately pinpoint the next Bitcoin spike. Like the stock market, Bitcoin is volatile and unpredictable short term. Be extremely skeptical of anyone who claims otherwise. Block them on Facebook or WhatsApp and be blessed.
Bitcoin is an established technology
Bitcoin technology has been chugging along since 2009 without any major technical issues. The same can’t be said for Crowdstrike, one of the biggest cybersecurity companies in the world, and one that has cost companies a total of $10 billion in damages.
Most people don’t consider Crowdstrike a scam or its salespeople scammers. Despite being a reliable technology with over 99.99% uptime, Bitcoin (and blockchain in general) is often held to arbitrarily high standards compared to other technologies.
“Scammers use crypto, crypto is bad, ergo Bitcoin is bad,” seems to be the prevailing logic. But recently, that’s begun to change in higher circles. Major business owners like Jack Dorsey (co-founder and former CEO of Twitter, now X) are increasingly putting their money where their mouth is.
Bitcoin is becoming more trusted
More businesses are putting their faith in Bitcoin. It’s being increasingly adopted for business use by publicly-traded companies like Block, which is rolling out a feature allowing Square sellers to automatically convert a portion of their daily sales to Bitcoin using Cash App.
PayPal, Microsoft, and Starbucks are other examples of companies who have begun to associate with Bitcoin, facilitating payments via the cryptocurrency.
Charlie Munger is right to be skeptical of crypto advocacy. A lot of it deserves to go the way of the dodo, especially the scams. But mixed with the mud is a Bitcoin-shaped nugget of functional tech, one that’s increasingly being adopted into modern finance. It may be worth a look.
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