Getting past the minefield that is crypto trading

A representation of virtual currency, bitcoin. [Courtesy]

For someone who does online trading, where the markets are ever-changing, Brian Mong’are is an unusually calm man.

“Your biggest asset when you trade online is trust. The problem is that we have people who rush into this space to con others,” said Mong’are.

He represents thousands of Kenyan youths who have cast their investment net in the online sea to pay their bills.

This as the coronavirus pandemic continues to render millions of Kenyans, including the youth out of jobs.

The situation was already bad enough pre-pandemic, with data from Kenya’s National Bureau of Statistics showing that 40 per cent of Kenyan youth were jobless as of February 2020.

One of the most preferred means of making money online for a majority of the youth is cryptocurrency trading.

Despite its success, however, it has had its fair share of controversy, with two Bitcoin Ponzi schemes collapsing in the country over the last two years. But those who have mastered the game like Mong’are are reaping huge benefits.

“In online trading, the higher your cash, the better your chances of reaping huge,” he said. ”But you must ensure you transact from legitimate sources online,” cautioned Mong’are.

The cryptocurrency craze first hit the country in early 2015.

A cryptocurrency is a digital or virtual currency that is decentralised and does not have the backing of a government or State agency as legal tender.

In Kenya, trading in cryptocurrency is neither illegal nor prohibited. The closest the government has ever come to announce itself on this issue is a warning informing investors that the trade is not licensed and they are not protected in case of losses.

Consumer protection concerns led the Central Bank of Kenya (CBK) to issue a notice in December 2015, warning the public against virtual currencies, such as Bitcoin.

The notice indicated that Bitcoin is not a legal tender and thus no protection exists in the event that a platform that exchanges or holds a virtual currency fails or goes out of business.

“There are risks associated with cryptocurrency, particularly on consumer protection, fraud, hacking and loss of data, and they are prone to be used as pyramid schemes,” said CBK Governor Patrick Njoroge in a previous interview.

In one of the cryptocurrency scams investors were said to have lost more than $25 million (Sh2.6 billion).

The currency has experienced sharp value fluctuations. It was trading at a high of about Sh7.3 million early this year but experienced a downward spiral to settle at Sh6.3 million at the end of this week.

While trading in cryptocurrency is legal and investors most time recoup their investment, personal finance coach Susan Keter warns it is easy to get your fingers burnt if you rush to put your money into a scheme without doing due diligence on its legitimacy and possible returns.

“Investing is not the first step; learn how to earn money, and there are no shortcuts to wealth creation. Invest heavily on research before putting your money in any investment,” said Ms Keter.

The cryptocurrency trade that thrives online naturally attracts fraudsters, hence the need for vigilance. According to Mong’are, the surest way of protecting yourself against fraudsters is to double-check everything.

“Before you release your coin, ensure that your online wallet has received the cash, and it must be accompanied with a transaction code. Don’t release your coin before money hits your wallet,” he said.

Another minefield that investors in this space should be wary of is the huge number of hackers that pry on accounts.

The most common bait used is the sending of a word code that you are required to scan for the transaction to be completed only for your account to be phished.