The Allusive and Volatile World of Cryptocurrency

Victoria Sztanek
The AMLette
Published in
6 min readMar 2, 2021


Here’s a piece of wisdom you’ve likely heard before: don’t invest in something you don’t understand. It sounds obvious, but economically precarious times, fear of missing out on investment opportunities, and the pressures of sensationalist media have important psychological effects on even the most wary of us.

With Bitcoin reaching an all-time high last month and an onslaught of bull run markets for alt-coins (meaning ‘alternative coins’ or cryptocurrencies other than Bitcoin) — crypto’s allure has been stronger than ever.

It’s an ideal concoction: anecdotal stories of crypto-millionaires, expert acknowledgment of a continued move to the mainstream, and tweets from influential public figures like Elon Musk. All of which have increased public interest and ultimately, rendered ‘cryptocurrency’ a buzzword.

Photo by Austin Distel on Unsplash

Stories of bitcoin millionaires are by no means new. Many of them are a product of the 2017 boom that saw prices soar, and which was followed by a bust in 2018. Bitcoin’s price has since hovered inconspicuously until last year’s pandemic crippled the global economy. Ensuing government aid and stimulus packages agitated fears surrounding inflation and global economic collapse. These factors have likely played a significant part in Bitcoin’s recent uptick — as investors turn to an alternative store of value for a rapidly evolving economic climate.

The caveat with cryptocurrencies is that they operate in a highly unstable market. Prone to extreme volatility, it’s been called the ‘crypto Wild West’, prompting warnings from regulators who caution against promises of fast and high returns. Where there is an opportunity for profit, there is an opportunity for loss — and in the case of crypto, it can be astronomical.

Especially without a clear and confident understanding of exactly how cryptocurrency even works — it’s a bumpy bandwagon to jump on. For those lacking a natural inclination for technology or computer science, the learning curve can feel particularly steep. Akin to learning how the Internet worked when it was first introduced to the general public in the 1990s, it takes considerable energy to reimagine an entire system and by consequence, a different society with crypto.

How did it all start anyway?

Understanding the future of cryptocurrency and the narratives that surround it requires at least a basic understanding of how Bitcoin, the first cryptocurrency, came to be.

Bitcoin’s origins read somewhat like the pages from a mysterious sci-fi novel. In 2008, a whitepaper titled ‘Bitcoin: A Peer-to-Peer Electronic Cash System’ was shared to a cryptography mailing list. Published under the pseudonym Sakoshi Nakamoto, the paper proposed “a decentralized digital currency which verifies transactions through a network of nodes protected through cryptography”. “Individuals who maintain these nodes and verify transactions in the process are called ‘miners’ and are rewarded with Bitcoin for maintaining the network”.

In essence, Nakamoto’s system eliminated the need for central banks or government interference — since people can send money directly to one another (without an intermediary) and outside parties are not allowed to create bitcoins (unlike FIAT money which is government-issued like Euros, and where circulation is controlled by the central bank).

Accompanying this revolutionary paper, Nakamoto released a short 500-word essay which suggested that “the move for creating bitcoin was anger at the financial crisis” and distrust of central banks. Nakomoto posited that “the root problem with conventional currency is all the trust that’s required to make it work”. Banks, who are almost universally entrusted with everyone’s money have proven to “lend it out in waves of credit bubbles with barely a fraction in reserve” as evidenced by the 2008 financial crisis.

Photo by Executium on Unsplash

Bitcoin, being a system backed by mathematics rather than state governments, has a philosophical underpinning that directly criticizes the dominant fiat money system as well as “interventions taken by governments and other agencies.’”

Naturally, this critique and push for autonomy from government lend itself well to libertarian and anarcho-capitalist thought. And that’s why from the beginning, individuals with these political inclinations made up the majority of crypto enthusiasts — drawn to the promise of money being protected from government meddling.

Shifting political ideologies

While Bitcoin was born out of this specific political context, it has since gradually evolved to attract individuals with varying beliefs. One particularly stark example is a growing interest in crypto communism and cryptosocialism, which tends to see blockchain as a tool for funding protest movements, keeping the government accountable, and avoiding sanctions.

There is also differences between cryptocurrency investors — like the widespread (though contested) notion that the Ethereum community is made up of individuals who subscribe to a more progressive political thought.

A large part of crypto’s ideological appeal is that the blockchain technology backing it boasts widespread social benefits — like making remittance payments cheaper and providing opportunities for the unbanked in developing countries. These potential benefits transcend political dispositions, offering a unique solution to widely felt global problems.

With the recent surge in public interest, the makeup of the cryptocurrency community is changing as it attracts different types of investors. Unfortunately, however, like all financial sectors, cryptocurrency remains a male-dominated space. A recent study revealed that 15% of Bitcoin investors and just 12% of Ethereum investors are female. These numbers have been slightly increasing over time and optimistically, according to one survey, “39% of millennial women say they would be more interested in crypto if they knew it could make finance more accessible to all genders” — a possibility that seems more likely with crypto’s increased popularity.

One telling sign of its move from fringe to mainstream is that more and more retailers like PayPal and Amazon are beginning to accept crypto either directly or through third-party wallets.

Photo by Pawel Janiak on Unsplash

Scams: Be Wary, Be Warned

For all its progress and promise to solve social issues concerning the unbanked, some have deemed cryptocurrency as nothing more than a pyramid or a Ponzi scheme. Indeed, Ponzi schemes in the virtual currency space are plentiful.

One of the most notorious cases was the OneCoin scam spearheaded by Dr. Ruja Ignatova in 2016. Dr. Ignatova successfully executed a global multi-level-marketing scheme for an invented cryptocurrency that lacked the blockchain technology necessary to make it function. She disappeared in 2017, leaving a global assortment of victims from the United Kingdom to Uganda to suffer financial consequences. One chief lesson to be learned from the OneCoin scam is the importance of investment literacy. The scam came during the Bitcoin buzz a few years prior, where investors hastily overlooked the technological requirements to ensure the currency’s functionality.

While it’s getting more difficult to stand behind the universal claim that crypto is just a scam — its relatively unregulated, anonymous, and experimental nature has made it an ideal facilitator for crime.

Probably the most famous and early example is the online drug bazaar SilkRoad in 2011, which exclusively accepted Bitcoin on the dark web. Through the selling of narcotics, SilkRoad demonstrated the potential misuse and downside of a system that prioritizes anonymity.

Many crypto scams today center around hackers. Demonstrated by last year’s Twitter Hack, where fraudulent tweets were posted on 130 accounts, including high-profile figures like Barack Obama, Elon Musk and Bill Gates. The fraudulent tweets asked individuals to send Bitcoin to a specific crypto wallet, promising that the money would be doubled and sent back.

The hacker defrauded around 400 victims of a total of USD 121,000 in bitcoin. Investigators pointed to a social engineering scheme that targeted a small number of Twitter employees to gain access to the company’s internal systems. The transparency of the bitcoin blockchain significantly aided the investigation, which saw the arrest of a 17-year old Florida native.

Another recent scam was the exploitation of the popular newsletter platform Substack. Through impersonating various cryptocurrency projects, like the popular blockchain project Gnosis, scammers encouraged readers to “‘upgrade their smart contracts’ and send funds to a proxy contract ID.’”

Technological and financial literacy

In all its market volatility, ideological polarization, and technological complexity — the continued evolution and incorporation of cryptocurrency seems certain. This is made clear by significant moves in the compliance space to regulate the industry.

Crypto’s prevalence underlines why technological literacy and caution are crucial tools in navigating the tumultuous world of crypto. And once a benchmark of knowledge is established, touted benefits like empowering the unbanked and general accessibility can be explored (and reached) more fully.

Until then, caution and diligence against scams and frauds should be exercised — just like in any industry.