House of Horrors
They just don't get it - instead of trying to understand crypto and educate the public, the mainstream media just ends up confusing the issues and scaring people away.
From obtuse mischaracterizations of the word "hack" to absurd howlers like "you may have to pay taxes on any profits" - DUH!, here are just a few of the ways the media turns cryptocurrency into a house of horrors.
Throwing Around The Word "Hack"
When first confronted with crypto, most people have a hard time wrapping their head around the concept of a digital asset. What does it mean to own something that has no tangible, material, or physical presence, and nothing backing it up but trust in mathematics?
The media exploits this vulnerability to the hilt by throwing around the word "hack" whenever they talk about cryptocurrency. Any non-techie reading financial news would be forgiven for believing that cryptocurrency blockchains are hacked all the time.
In fact, the cryptographic mathematical architecture of blockchain makes it nearly impossible to tamper with or corrupt in any way. Hacks are targeted where they are and they work not in spite of, but precisely because, the blockchain is so secure. Thieves can count on the fact that the private keys they are stealing will give them unfettered anonymous access to the chains of transactions that define the ownership of unique coins that can't be taken away from them.
A recent article in the reputable business magazine Fortune is a perfect example of the obtuse mischaracterization of the word "hack". The article states "A Ukrainian hacker group dubbed Coinhoarder has stolen more than $50 million in cryptocurrency from users of Blockchain.info, one of the most popular providers of digital currency wallets, according to a report published Wednesday by Cisco’s Talos cybersecurity team."
No Magical Superpowers
This was not a hack at all, but a classic phishing scheme in which fake google ads pointing to bogus look-alike URLs like "blokchien.info" somehow convinced users to give up their private keys - and their wallets were subsequently emptied out.
The video accompanying the Fortune article said "hackers are attacking investors ... getting into their accounts". This is irresponsible reporting at best and deceptive demagoguery at worst. There is no magical fake google ad and hackers have no superpowers that will give them access to your private key. The only way they can get it is if you give it to them - and you should never give your private key to anyone, ever. It is the only key in the universe that can cryptographically unlock the funds sent to your public address.
The words "hackers are attacking investors" makes individuals feel threatened, while ignoring the real target of actual hackers - exchanges and other sites where multiple customers' funds and private keys are stored, usually with lax security precautions. This was the case in the recent Coincheck hack, in which half-a-billion dollars' worth of XEM was stolen because investor keys were kept in hot storage and not protected by a multi-signature access protocol.
The infamous Mtgox hack was the simple theft of a single text file of private keys, and the thieves withdrew bitcoin from these accounts for years.
Unless you are a whale with a billion-dollar wallet, hackers are not after your individual account or wallet, but rather the third-party site where it is stored. So store the majority of your funds off of exchanges in cold storage, and never share your private keys, wallet PINs or recovery seeds with anyone.
Another favorite of the media to associate with crypto is the "V" word - Volatility. The Fortune Magazine video on the risks of crypto investing says "they are much more volatile than stocks or bonds - they can go up 25% in a matter of hours or even minutes, and they can crash, which is extremely common."
That's just another way of saying you can make or lose a lot of money quickly, and it's true across the board in investing that risk and reward are flip-sides of the same coin.
Recall that bitcoin was trading at about a thousand dollars a year ago, and it's now at $10,000. Ethereum, the native cryptocurrency of the blockchain-builder platform, was trading at less than 10 dollars at the beginning of 2017, and it's now almost a hundred times that!
Sure the stock market is less volatile, but you'll be lucky if you average a 10% return per year. In cryptocurrency, 10x your money, even 100x your money in less than a year is not uncommon. These are the kind of returns that would take several lifetimes in the stock market.
So if you're happy with a 7% annual return, invest in real estate, for 10%, check out stocks. But if you want to 10x or even 100x your money in a year, crypto is where it's at. Sure it's volatile - but risk and reward go hand-in-hand.
You "Might" Owe Taxes On Any Profits
This is one of the most absurd so-called "risks" of cryptocurrency investing that the media loves to scare people with. There's no "might" about it. The IRS will figure out how to track crypto profits and enforce the law, which, in case you didn't know, says that if you make a profit you owe taxes on it.
If you owe taxes, that means you're making money - and that's a good thing. Paying taxes is not a "risk" of investing, it's a fact of life. If you want to make money and not pay taxes I would suggest moving to someplace like Luxembourg or Dubai.