Cryptocurrencies like Bitcoin have seen a rapidly growing number of deeply indebted consumers getting themselves into financial trouble.
Financial expert and Debt Rescue chief executive, Neil Roets said he was amazed when the first clients started applying for debt counselling who had been driven to the brink of bankruptcy by buying into get-rich-quick schemes involving cryptocurrencies.
“We interviewed our first cryptocurrency victims towards the end of last year who wanted to go under debt review because they were no longer able to adequately service their debt. To my amazement, many of them had been the victims of scams involving cryptocurrencies which promised massive returns.
"Some of them had gone as far as pawning their vehicles, taking out second bonds on their homes and borrowing money on credit cards in order to buy cryptocurrencies,” he said.
Roets said some of the scams involved accounts being hacked by offshore hackers who stole every last penny or by sellers who never actually delivered the digital currency after they had been paid. While in most cases, however, it was simply the vast losses they incurred as a result of extreme volatility of these currencies.
Anoeska van Wyk, 25, of Grassy Park said she became interested in Bitcoin after hearing of a friend who bought a pair of sneakers using virtual money.
“I found this very intriguing because money as I knew it was always a physical entity. Cryptocurrencies tend to fluctuate by 10% daily - and this is considered common. You would need to be a risk taker. I tend to belong to the risk averse part of the population.”
Marlon Christmas, a Bitcoin miner, said miners use special software to solve maths problems and are issued a certain number of bitcoins in exchange.
“Most go the route of buying crypto coins at a low price and then selling them at a high price you get physical money but it gets paid to you in bitcoin and then you move your bitcoin to a cryptocurrency exchange where you can change it for rands. From a mining perspective, it is more profitable than putting your money into the bank. You can get your return on investment almost within six months, which no bank will offer you.”
What is it?
Created by software developers under the pseudonym Satoshi Nakamoto, Bitcoin is a form of digital or cryptocurrency that is created and held electronically and can be used to buy products electronically.
It’s the first form of digital currency and has no central bank or single administrator.
The network is peer-to-peer and transactions take place between users directly, without an intermediary.
When bitcoins are lost or stolen they are completely gone, just like cash.
With no central bank backing your bitcoins, there is no possible way to recoup your losses.