Investing in cryptocurrency can be as easy as a few taps on your phone, and with crypto all over the news and coming up in conversations with friends, it’s tempting to dive right in. However, depending on your financial situation and appetite for investing risk, crypto might not be an appropriate investment for you right now — or ever.
“I am the biggest crypto hippie you’ll talk to in a very long time,” says Tyrone Ross, CEO of Onramp Invest, a cryptoasset platform for registered investment advisors . And yet, he cautions against it. “I don’t think the general public should be investing in crypto.”
Picture your finances as an ice cream sundae, with crypto as the cherry on top. It makes up a small proportion of the overall sundae, and not everyone wants one. And before you fish that cherry out of the jar, you need to assemble the rest of your dessert. In non-ice-cream terms, that means creating a strong financial foundation and learning everything you can about crypto before you put any real money in.
PUT FINANCIAL SAFEGUARDS IN PLACE
First and foremost, you need to prepare for those times when things don’t go as planned.
Over the past year, workers who lost income because of the pandemic had to tap into savings, take on debt or enter into hardship programs to afford their bills. This time has been a stark reminder of the importance of having an emergency fund.
“When you’re young, you can feel like Superman or Superwoman, but when the bubble happens, you could easily be out of a job for nine to 12 months,” says Theresa Morrison, a financial planner in Tucson, Arizona. “Don’t underestimate systemic shocks to the market.”
Morrison recommends saving up six months of living expenses if you’re single, or around three months if you share expenses with a working spouse or partner. But stashing away even a few hundred dollars can be helpful when you’re faced with an unexpected expense . And if you have any high-interest debt, like credit card debt, paying this down can further strengthen your financial position.
Review your insurance coverage, too, because these policies can provide much-needed money during difficult times. Life insurance can be especially important if you have dependents.
SAVE AND INVEST FOR FUTURE PLANS
Once you have money set aside for emergencies, begin thinking about your short-, medium- and long-term financial goals. Retirement is, of course, a big thing to save for, so contribute to retirement accounts (especially if you have access to a plan with an employer match). But set specific savings goals for other major life steps.
“Most people want to travel every year, buy a house in 10 years, get married in 10 years. These things cost money,” Morrison says. “Put down how much it’ll cost in today’s terms and figure out how much to save out of your paycheck every month. From my experience, that alone can be $1,000 a month.”
GET EDUCATED ABOUT CRYPTOCURRENCY
You’ve got the money and you’re ready to jump on the crypto bandwagon, only you have no idea how someone even buys crypto. Or how it will fit into your overall financial plan. Or if it’s too risky for you.
Time out. Don’t do anything with your money that you don’t understand. Dedicate some time to learning everything you can about crypto. Understanding the mechanics is important, but so is learning what kind of investor you are, because that also affects the kinds of investments that would be a good fit for you.
“There’s a process you have to go through to determine if this new asset class is right for you. What’s your plan? How old are you? What are your goals? How tech-savvy are you? Do you understand what it means to hold these assets and have them not be insured? If something happens to you, who in your family knows about this stuff to retrieve it?” Ross says. “People don’t do the right due diligence before dumping money into something. I know that’s not the sexy answer, but it’s the truth.”
IF YOU STILL WANT TO DABBLE IN CRYPTO, START SMALL
Once you have a grasp on how it all works, you can begin to think about allocating some of your excess cash (after you pay your bills and meet your monthly savings goals) toward crypto. But keep your investment totals small and manageable. Ross recommends investing up to $500 or so. This way, even if you lose it all, it’s an amount you specifically budgeted.
“If you invest in crypto, think of it as dead money. Money you’ll never get back,” says Danny Lee, a financial planner in Denver. “At the end of the day, it’s going to be a speculative investment.”
Far-right cryptocurrency follows ideology across borders
The Daily Stormer website advocates for the white race, posts hate-filled, conspiratorial screeds against Blacks, Jews and women and has helped inspire at least three racially motivated murders. It has also made its founder, Andrew Anglin, a millionaire.
Anglin has tapped a worldwide network of supporters to take in at least 112 Bitcoin since January 2017 — worth $4.8 million at today’s exchange rate — according to data shared with The Associated Press. He’s likely raised even more.
Anglin and other radical right provocateurs have raised millions from around the world through cryptocurrencies. Banned by traditional financial institutions, they sought refuge in digital currencies, which they are using in increasingly sophisticated ways to skirt the oversight of banks, regulators and courts, finds an AP analysis of legal documents, Telegram channels and blockchain data from Chainalysis, a cryptocurrency analytics firm.
Anglin owes more than $18 million in legal judgments in the United States to people whom he and his followers harassed and threatened. His victims can’t find him, and for now his Bitcoin fortune remains out of reach.
Beth Littrell, a lawyer for the Southern Poverty Law Center who is helping represent one of Anglin’s victims, says it’s grown harder to use the legal system to stamp out hate groups whose networks and money are virtual. “The law is evolving but lagging behind the harm.”
EDITOR’S NOTE: This story is part of a collaboration between The Associated Press and the PBS series FRONTLINE that examines challenges to the ideas and institutions of traditional U.S. and European democracy.
Chainalysis collected data for a sample of 12 far-right entities in the U.S. and Europe that publicly called for Bitcoin donations and showed significant activity. Together, they took in 213 Bitcoin — worth more than $9 million today — between January 2017 and April 2021.
Andrew “Weev” Auernheimer, Anglin’s webmaster for the Daily Stormer, has raked in Bitcoin worth $2.2 million at today’s values. The Nordic Resistance Movement, a Scandinavian neo-Nazi movement banned in Finland, Counter-Currents, a U.S.-based white nationalist publishing house, and the recently banned French group Génération Identitaire have each received Bitcoin that’s now worth hundreds of thousands of dollars, Chainalysis data shows.
“Do you really think how we operate our economy is any of your business?” Martin Saxlind, the editor of NRM’s magazine, Nordfront, asked AP in an email. “Swedish banks have abused their control of the economy to deny us and others regular banking accounts for political reasons. That’s why we use cryptocurrency.”
Anglin’s former lawyer, Marc Randazza, argued that political censorship by financial authorities is driving people underground. “It’s more Nazi-like than Andrew Anglin could ever hope to be,” he said. “Don’t create a black market and then be surprised there’s a black market.”
Despite cryptocurrency’s reputation for secrecy, Bitcoin was built for transparency. Every transaction is indelibly — and publicly — recorded on the blockchain, which enables companies like Chainalysis to monitor activity. Individuals can obscure their identities by not publicly linking them to their cryptocurrency accounts, but with Bitcoin they cannot hide the transactions themselves.
Because of that public footprint, in November 2020 Anglin asked his supporters to send him money only in Monero, a “privacy coin,” designed to enhance anonymity by hiding data about users and transactions.
Monero, Anglin advised supporters in February 2021, “is really easy. Most importantly, it is safe.”
Others have reached the same conclusion. The list of people now seeking donations in Monero rather than Bitcoin includes Thomas Sewell, an Australian neo-Nazi; Jaz Searby, who headed an Australian chapter of the Proud Boys; the Global Minority Initiative, a “prison relief charity” for American white nationalists; and France’s Democratie Participative, a racist website banned by French courts in 2018.
Just as the ideologies of the radical right — whether white nationalists, neo-Nazis or self-described “free speech” advocates — are globalizing, so is the financing. Blockchain data shows that Anglin’s donors are part of a global community of believers. Since 2017 his donors have also given Bitcoin to 32 other far-right groups and people in at least five different countries, according to Chainalysis data.
Chainalysis also found that money donated to the sample of 12 far-right entities came from global cryptocurrency exchanges, with a growing role for Western and Eastern European-focused exchanges.
Kimberly Grauer, Director of Research at Chainalysis, said the shift to global exchanges “certainly could be in order to obfuscate detection, but it could also be a sign that increasingly donations are coming in from all over the world.”
In December 2020, shortly before his suicide, a French computer programmer named Laurent Bachelier sent 28.15 Bitcoins — then worth over $520,000 — to 22 far-right entities. The bulk went to Nick Fuentes, an American white nationalist influencer who would spend the coming weeks encouraging tens of thousands of followers to lay siege to the U.S. Capitol. One bitcoin went to a Daily Stormer account.
The money trail shows domestic extremism isn’t purely domestic and highlights the ease with which cryptocurrency can fund extremists around the world.
Bachelier’s money passed through accounts that were not hosted by regulated cryptocurrency exchanges, according to Chainalysis. The transactions only became public because of a tip to a Yahoo news journalist and the fact that Bachelier left digital traces that led to his email.
Cryptocurrency exchanges, which can convert Bitcoin into U.S. dollars and other currencies, are generally regulated like banks, allowing authorities access to information or funds.
But cryptocurrency wallets can also be “unhosted,” which means that users themselves control access. Unhosted wallets — like Fuentes’ — are akin to cash. They don’t have to go through banks or exchanges that could flag suspicious transactions, verify a user’s identity or hand over money to satisfy a court judgment.
Anglin’s wallets are also unhosted, according to Chainalysis.
“The problem with an unhosted wallet is what is your pain point?” said Amanda Wick, who served as a senior policy adviser for the Treasury Department’s Financial Crimes Enforcement Network and as a federal prosecutor before joining Chainalysis as chief of legal affairs. “The only thing we have is civil contempt or criminal conviction. If someone is willing to sit in jail and the money is theirs on the other side because no one can access it, that’s a problem.”
China outlaws all cryptocurrency transactions, Bitcoin value yields
The People’s Bank of China doubled down on Friday its crackdown on all cryptocurrency mining and trading activities by instituting its latest regulation prohibiting overseas cryptocurrency exchanges from accommodating to Chinese citizens under threat of criminal penalty, yielding Bitcoin value.
China’s perception of decentralized currencies is not a thing of the past. As the first country to release paper currency when money was meant to pave the way for this powerhouse to have a say in which direction its economy goes, the People’s Bank of China spoke its peace and declared all cryptocurrencies illegal.
The regulation clearly states that any decentralized transaction is illegal since such currencies “do not have legal tender status,” meaning it “cannot be circulated as currency in the market,” according to China’s Central Bank’s statement.
China has always been outspoken about its stance towards cryptocurrency since the concept of decentralized money could bring down any dominion authorities have on the country’s currency.
The country’s central bank further defended their decision by referring to the world’s largest cryptocurrency, Bitcoin, in addition to various virtual currency transactions as one of the leading disruptors of financial structure, creating an elaborate yet undetectable blueprint for “money laundering, illegal fund-raising, fraud, pyramid schemes, and other illegal and criminal activities,” the bank said in a statement.
Due to the bank’s latest regulatory proceeding, any cryptocurrency transaction will be deemed as criminal financial misconduct in China and the individual behind these transactions will be treated and judged accordingly.
China’s central bank’s latest regulatory rule will eradicate any association with any form of cryptocurrency, be it Bitcoin or its lineage, as the government sets new rules to preserve and protect national security.
To highlight, this regulatory conduct will lead to a decrease in crime such as gambling, illegal fund-raising, fraud, pyramid schemes, excessive energy usage, and much more. The People’s Bank of China forthrightly addressed Bitcoin, Ether, and Tether in their latest tactics by labeling them as illegal virtual currencies.
In 2007, Chinese authorities initiated a plan to deny its citizens any virtual currency exchange within the country’s borders. While the government was implementing harsh and scrutinizing procedures to prevent its residents from indulging in such activities, but people carried on with selling, buying, and mining cryptocurrencies.
China banning all crypto-related transactions had a spiraling effect on Bitcoin, as the monarch of all cryptocurrencies withheld a devastating 8 percent drop in value reaching about $41,000 as of 9 AM in New York following the publicized announcement, according to Bloomberg.
At the moment, Bitcoin value stands at $43,808 as of time of writing, according to CoinDesk.
“China’s ban on all cryptocurrency trading activity will have some short-term impact on the currency’s valuation, but long-term implications are likely to be muted,” assistant professor of finance at Warwick Business School, Ganesh Viswanath Natraj told Bloomberg.
At this stage, the fight between central banks worldwide and cryptocurrency is intensifying faster than ever as China takes the first major initiative to impose its supremacy over the industry on its own turf.
While the Chinese government’s behavior could be perceived as a bit jarring, one must comprehend that this move could be an action to empower China’s Central Bank Digital Currency (CBDC) in the long run and levy control over cryptocurrencies’ exponential energy usage amidst the country’s severe power crisis, resulting in a fluctuation in Bitcoin value.
CFTC delves into Binance’s insider trading conduct
U.S. Commodity Futures Trading Commission (CFTC) sharpens its regulatory gaze as it initiated a condensed investigation into cryptocurrency trading platform Binance Holdings Ltd. for probable crypto exchange abuse for insider trading and market manipulation, according to Bloomberg.
It seems that even though not everyone can stand its probing scrutiny, the U.S. is feeding its recently found power over tech companies by initiating its latest investigation into Binance, following concerns of the platform’s servers’ location and if the U.S. has any power to impose its authority on the case.
Bloomberg reported on Friday that CFTC watchdogs have been searching for probable witnesses to provide information concerning Binance’s behavior in the U.S. and whether it allows the country’s residents to buy and sell derivatives linked to Bitcoin and other cryptocurrencies.
It is worth highlighting the intensity of the CFTC’s investigation lies with the fact that Binance’s prohibition from conducting any business in the U.S. since it is not registered with the country.
In its defense, the trading platform released a statement addressing the issue by emphasizing the value it holds for its unthreatened saintly guidelines and its customers.
“At Binance, we have a zero-tolerance policy for insider trading and a strict ethical code related to any type of behavior that could have a negative impact on our customers or industry,” Binance spokesman stated.
“Binance’s security team has long-standing guidelines for investigating wrongdoing and holding workers accountable, with termination being the minimal repercussion,” the spokesperson told Bloomberg.
The Commission’s representative has refused to comment on the matter so far.
This isn’t the first time the CFTC launches a thorough examination into cryptocurrency, specifically the sales of derivatives connected to cryptocurrency.
As Washington sets its focus on cryptocurrency’s exponential growth and examines its behavior, the Justice Department and Internal Revenue Service unleashed a criminal investigation into whether Binance has been an accomplice in money laundering and tax evasion schemes.
The Justice Department and the CFTC have been studying the platform’s moves for months as both worryingly observe its market behavior concerning links to unlawful conduct, as crypto firms are deviating towards traditional financial services without preserving their consumers’ interest.
If the CFTC’s concerns are in place, then the absence of consumer protections, in addition to regulations, might potentially harm users signing up to safeguard their valuable investments by placing their trust in the hands of the Chinese platform and a multitude of crypto exchange firms.
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