People in South Africa really went crazy for Bitcoin and quick money

People in South Africa went crazy for Bitcoin in the second half of 2017.

I’m not using crazy hyperbolically – the stories I have heard can only be described as the actions of someone not thinking straight.

After avoiding conversations about Bitcoin, Ethereum, and other cryptocurrencies last year – as most people either wanted to brag or demand investment advice – the sustained drop in the price of most tokens in 2018 has made it safe to engage with others on the subject.

Asking “how much Bitcoin did you, or do you, own” and “did you make any good returns”, however, has exposed how people threw money into exchanges and schemes with no idea of what was going on.

The Bitcoin hype

Bitcoin was on the march in the second half of 2017.

Local prices on Luno went from around R55,000 in September to R255,000 in December.

Bitcoin owners were gaining as much as 10% per day when the going was good, and those who did not own cryptocurrency were determined not to miss out.

But rather than looking to hold Bitcoin and watch it grow, they were only interested in quick money – and were prepared to cast common sense aside to make it.

Of the people I spoke to, there were a few cases which stood out.

Mining rigs

Remember all those articles about graphics card shortages in South Africa and how crypto miners were buying all the high-end GPUs?

The shortages were thanks to a huge demand for crypto mining rigs, which can be used to mine, among other tokens, Ethereum and Bitcoin – via services like NiceHash.

A local business owner who I spoke to, and described by his friends as the “most un-techie person I know”, bought 8 six-card rigs to mine Ethereum last year.

Six-card rigs start at around the R50,000 mark, and the goal was to make as much money as possible.

When asked if they were using Claymore, or NiceHash when Ethereum dropped in price, the response was “I don’t know, we have an IT friend who handles that for us”.

Spending R300,000 on mining hardware and not knowing how it runs is not advisable.

Plus500

Many of my friends told me they bought Bitcoin in 2017 – or at least they thought they did.

When I asked one how much they still owned, he grabbed his phone and opened an app called Plus500.

It turned out Plus500 was a trading platform that offered contracts for difference (CFDs), with options on Bitcoin.

In short, CFDs are leveraged instruments – 1:20 leverage in this case – that allow you to access an underlying asset without having to own it, or being able to afford to own it.

This allows you to make high profits in a short space of time, but it can also mean you lose your investment and any capital in your trading account. Essentially, your CFD can go into you owning the seller money.

The Plus500 website says as much when you sign up: “Remember that CFDs are a leveraged product and can result in the loss of your entire capital”.

While there is nothing wrong with CFDs, they are an advanced trading instrument.

In this case, however, the person I spoke to who was using it was not aware of how CFDs work – and the fact that at no point did they actually own any Bitcoin.

They heard about the Plus500 platform “from a friend” – and while money was made, money was also lost.

BTC Global

When we came across BTC Global in the office, we laughed at “master trader” Steven Twain’s photo of him drinking a milkshake and at how obvious a scam the Bitcoin investment scheme was.

Several weeks later, we were writing about how South Africans had lost millions after “Steven Twain” disappeared and the BTC Global site stopped payouts.

Besides the poor site design and laughable photo, BTC Global’s “guaranteed 14% WEEKLY returns” were a clear sign this was a scheme – pyramid or otherwise.

Before the news broke, however, I was sent an email from a close friend. Her father and his business partner had opened an account with BTC Global and were about to invest money into it.

They had heard about BTC Global from – you guessed it – a friend, and wanted to know what I thought before making a deposit.

The fact that smart, financially-secure business owners had opened a BTC Global account and were ready to put money in it was baffling.

Their desire to not miss out on all the quick money being made was no doubt a driving factor, and I advised them to delete the account.

CryptoKitties

The hype surrounding cryptocurrency affected everyone who engaged with it to some degree, and for many of us in the office, this was evident when CryptoKitties launched.

The cat collection and trading game had it all – it was based on Ethereum, it used a MetaMask plugin for your browser – which let you transact on the blockchain – and it featured cool cats with varying degrees of rarity, based on their genetics and which “generation” they were.

CryptoKitties provided a great example of what cryptocurrency was to most people.

While understanding Ethereum, its blockchain, smart contracts, and the MetaMask plugin was relatively easy, learning about what made the cats valuable took more time.

Combining this learning curve with the rush to buy and breed “valuable cats” meant that decisions to purchase and sell – and the prices at which this took place – were often based on no real evidence.

When the dust settled and I learnt more about the game, the selling price of cats had dropped substantially and I had spent well over R2,000 on digital tokens which were now almost worthless.

It was a cheap lesson in hindsight, and provided insight into how easy it is to get caught up in the need to not miss out on the “next big thing” – especially if there is money on the line.

Now read: How to change your Facebook settings to opt out of platform API sharing

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People in South Africa really went crazy for Bitcoin and quick money