Is Bitcoin legit or a scam?

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As cryptocurrencies go, Bitcoin is relatively long in the tooth.

Established in 2009 by the pseudonymous Satoshi Nakamoto, the ‘original’ crypto has stood the test of time and is still the most recognised digital currency on the planet.

But that doesn’t mean people trust it. In fact, there’s still a high degree of suspicion surrounding Bitcoin and cryptocurrency in general.

Many people continue to associate it with fraud and scams, while others still believe that it’s not even real and is in fact made up ‘magic internet money’.

Here, I’ll dispel some of these myths and examine whether Bitcoin and other cryptocurrencies are fake, or in fact a legitimate new form of payment/asset class for the ages.

Is bitcoin a scam?

Firstly, let’s examine Bitcoin on its own.

Despite the persistent doubters, many individuals, businesses and even governments around the world consider Bitcoin, or ‘digital gold’ as it’s sometimes referred to, a legitimate form of digital currency.

Bitcoin operates on a decentralised network called a blockchain where thousands of computers across the globe work together to produce an immutable ledger of every transaction. This makes it highly secure and transparent.

Unlike traditional ‘fiat’ currencies, Bitcoin operates independently of any central authority, such as a governments or financial institutions and is now considered legit by many.

Much of Bitcoin’s legitimacy stems from the fact that many traditional financial institutions are starting to offer Bitcoin based investment products and services.

It’s also increasingly being used as a method of payment by traditional businesses, especially given the rapid growth of the Lightning Network – a ‘Layer 2’ payment protocol designed to dramatically increase the speed and volume of transactions the Bitcoin network can handle.

Increasing Bitcoin regulation and recognition which is bringing crypto into the fold of more traditional financial products is also helping.

So, are Bitcoins legit? Yes, they undoubtedly are.

Is Bitcoin fake or fraudulent?

However, that’s not to say that Bitcoin is out of the woods yet, and it still faces an uphill struggle to win over the detractors.

Engage with any discussion about Bitcoin online and you’ll soon encounter references to it being a Ponzi Scheme or a purely speculative asset.

You’ll also hear people liken it to the Tulip mania of the 1630s which saw the price of bulbs reach extraordinarily high levels before crashing down.

This is often viewed as one of the world’s first examples of a speculative bubble and many Bitcoin critics draw parallels with this and the soaring value of Bitcoin, despite the length of time it’s been around for.

While Bitcoin is definitely not a scam or fake and is a completely legitimate cryptocurrency, there are also concerns about its volatility, environmental impact and use by those involved in illicit activities.

But proponents see it as something different.

They believe the traditional financial status quo is outdated and view Bitcoin as a disruptive technology which will bank the unbanked and cut out the institutional middleman who takes a cut of every transaction in the fiat system.

So, is Bitcoin fake or fraudulent? Certainly not, but there is a debate to be had about exactly how much the digital coins are worth.

Arguments for and against Bitcoin being legit or fake

For

• Growing adoption and acceptance. Many businesses and individuals around the globe now accept Bitcoin as payment which has contributed to the legitimacy of the crypto, which is now seen as a viable currency by many.
• Decentralisation and security. This ensures no one group or organisation can manipulate or control Bitcoin which enhances security and decreases the risk of fraud.
• Market performance. Despite it still being a highly volatile asset, since its inception Bitcoin has seen a meteoric increase in value, even though there have been some stomach-churning peaks and troughs. This has attracted institutional investors and bolstered confidence in Bitcoin being a store of value.
• Regulation. Bitcoin – and cryptocurrency in general – is increasingly being included into the regulatory framework of the traditional financial system by Governments and financial bodies around the world, which in turn gives people greater confidence in the asset class.

Against

• Decentralised. While decentralisation enhances security, Bitcoin’s position outside the traditional financial system makes critics wary. They believe this potentially exposes investors to scams, fraud, market manipulation and money laundering. This is rapidly changing as mentioned above.
• Volatility and speculation. As I’ve already mentioned, sceptics have major concerns with Bitcoin’s price volatility as these wild fluctuations can lead to significant losses for investors. Independent Financial Advisors are still very reluctant to discuss Bitcoin or cryptocurrency with clients, despite increasing demand.
• Association with criminality. In the earlier ‘Wild West’ days of Bitcoin it was seen as the go-to method of paying for illegal goods online and has also proved popular with criminals for money laundering purposes. This has left a stain on its image, but the regulatory changes that are being implemented are likely to counteract this to an extent.

Is cryptocurrency in general a scam?

Bitcoin is often used as an umbrella term for crypto, despite it being a specific coin.

In fact, there were more than 16,000 cryptocurrencies in existence at the time of writing.

So, are they all legit and above board? The short answer is ‘no’.

Many of these coins are definitely not a good investment as they are created with the sole purpose of defrauding those that buy into them.

It’s surprisingly easy to create a cryptocurrency if you have a bit of technical know-how and some spare cash.

Fraudsters will create a coin with absolutely no value or use case whatsoever, ‘pump’ it through social media until the value increases then execute a ‘rug pull’ whereby they cash out the coins they’ve kept for themselves while the value is high leaving investors holding a bag of worthless tokens.

For every cryptocurrency with a genuine real-world application which could potentially be a good investment, there are hundreds that are absolutely worthless.

While some of these might not be deliberately fraudulent or set up to scam people out of their cash, you’d be wise to steer clear of them.

Which is why its vital important to do your own research before investing in crypto to ensure that a project is worthwhile and not a scam.

As the cryptosphere becomes increasingly regulated, many people hope it will lead to the demise of these so-called cryptocurrencies which serve little purpose other than to give the industry a bad name while it struggles to improve its reputation.

Is Bitcoin safe?

If we’re discussing the value of Bitcoin, then no, the price is certainly not ‘safe’ and it’s likely that it will continue to see wild price swings as the market continues to evolve.

Although it’s referred to as a cryptocurrency and you can transact with it, Bitcoin is technically a commodity that’s bought using fiat money, and generally sold for the same.

This means that many people speculate on its value, whether going long and hoping that the price will increase in the future, or betting that the price will fall in the near term by taking a short position.

Certain trading activities, especially among Bitcoin holders known as ‘whales’, has led to claims of market manipulation.

However, similar accusations have long been levelled at traditional stock markets as well, especially when it comes to those who’ve acted on inside information.

It’s likely that there’s some truth in the claims regarding Bitcoin, but wherever there’s large profits to be made, someone somewhere will try to manipulate the situation to their advantage and this behaviour is certainly not unique to crypto.

And there’s still a risk, however unlikely, that Bitcoin and crypto in general could crash and become effectively worthless.

Crypto scams

Bitcoin is still a relatively new technology which a lot of people are unfamiliar with, and scammers are cashing in on this lack of education.

Which is why you need to be particularly careful when engaging with any Bitcoin or crypto investment scheme or platform.

Scammers often set up platforms to resemble legitimate crypto websites, including registering a very similar domain name to trick people into investing.

These fake websites are often used as part of what’s known as a pig butchering scam – a type of scam which has exploded in recent years.

This involves victims being contacted at random via social media platforms such as WhatsApp and Telegram, or through dating websites, and befriended by someone using a fake profile.

They’ll then be introduced to an amazing crypto investment opportunity, but once they’ve parted with their cash they’ll be locked out of their account and will never see the money again.

I’ve written extensively about how to spot a crypto scam and what to do if you’re scammed, and I regularly update this scam alerts page.

There are more links to other scam-related pages on The Crypto Adviser below.

Final word

Deciding if Bitcoin is legit or a scam is often a matter of personal opinion.

While there’s no doubt that Bitcoin is an innovative technology which has already disrupted the traditional financial system, concerns about its volatility and association with criminality persist.

But there seems to be no sign of Bitcoin or crypto going away, and the industry remains solid, despite some significant setbacks along the way, including the collapse of several major crypto exchanges.

As the crypto market continues to mature, individual and institutional adoption of Bitcoin is likely to increase.

However, investors and regulators need to strike a careful balance between embracing this new digital money while ensuring consumer protection from scams and poor investment advice, and the financial stability of global markets.

Nearly every major bank and financial institution now has some form of relationship with cryptocurrency, with many offering access to Bitcoin to their larger clients.

The perception of Bitcoin as a legitimate asset or a fake currency designed to scam people will be determined by the ongoing evolution of the cryptocurrency market and the regulatory developments that are rapidly being implemented.

My view is that Bitcoin itself is definitely a legitimate asset/currency, however there are many other ‘altcoins’ that are not.

If you need help or advice with any aspect of cryptocurrency, including checking if a platform is a scam or not, we can help. See our advice services page for more.

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