Netflix is constantly releasing what feels like an endless stream of true crime documentaries. The Tinder Swindler captivated audiences a month or so ago, but there’s a new documentary that’s gripping the world and raising a lot of questions about cryptocurrency investments.
It’s called Trust No One: The Hunt for the Crypto King and it follows the untimely death of Gerry Cotten. He died while traveling through India in 2018, leaving up to 190 million US dollars stranded in his cryptocurrency exchange, QuadrigaCX. As the owner of the company, he refused to give anyone else the passwords to the offline cold wallets, meaning this money was effectively lost forever.
It’s a very intriguing story that is full of conspiracy theories and stories of poor investors that lost hundreds of thousands of dollars due to no fault of their own. What’s perhaps the most interesting thing about this documentary is how much you can learn from it. While the intention isn’t to teach you about crypto investments, there are plenty of lessons you cat take away to help you when you trade.
Lesson 1: Centralized exchanges have drawbacks
In the world of cryptocurrency investments, you have both centralized exchanges (CEX) and decentralized exchanges (DEX). QuadrigaCX was the largest centralized exchange in Canada, so lots of investors trusted it. Globally, you have the likes of Coinbase and Binance as two of the most popular places to invest money in crypto.
Effectively, a centralized exchange operates as a middle-man for crypto investors. Let’s say you want to buy Bitcoin through one of these exchanges. You log into the platform, choose how much Bitcoin to purchase, and then go through with the transaction. At this point, the exchange will hold your Bitcoin for you, keeping it in a safe place. The value of your assets can go up and down depending on the market. Eventually, you can withdraw the money if you want, and it will transfer back into your bank account in whatever currency you choose. Alternatively, you could transfer the funds to your own crypto wallet.
This Netflix documentary highlighted a potential problem with this system. What happens if the exchange goes down or the owners can no longer access it. As seen in the film, all of the funds that are being held by the company will be unretrievable.
What is a decentralized exchange?
A DEX is different because there is no middle man. Trades happen between users, meaning when you buy cryptocurrency, you receive the assets right away and they never leave your wallet. It means that the issue with QuadrigaCX can’t ever really happen.
There are some drawbacks to DEXs as well, but this documentary really shone a light on some potential concerns when using centralized exchanges. Certainly, it highlighted the need to have your own crypto wallet and avoid keeping money on these exchanges where possible, just in case.
Lesson 2: Always be sceptical
The title of the documentary tells you to trust no one, and that’s a good mantra to have when dealing with crypto investments.
Many people believed that Gerry Cotten faked his death, but that’s just a wild conspiracy theory. What is true, however, is that he was scamming people through his crypto exchange. He was basically using a Ponzi Scheme to gamble users’ funds on other cryptocurrency websites. In the end, he lost hundreds of millions of money from his users.
This scam was only discovered after his death when people started digging into his past and seeing some of his older connections. It was soon revealed that he was part of a website that worked on developing scams and had scammed people before.
The lesson to learn from this is to always be sceptical of new things you see in the world of crypto. Whether this is a new coin or a new exchange; you should always approach things with caution. Do as much research as possible whenever investing, only putting your money in exchanges that have long proven their worth and reliability.
Never trust anyone that comes to you with a cryptocurrency ‘get rich quick scheme’, it will probably be a Ponzi Scheme of sorts. Don’t use crypto exchanges that have just popped up with almost no information about them online. Play it safe and always be cautious.
Lesson 3: Don’t be greedy
The third lesson you should learn from the documentary is that greed gets you nowhere in the crypto-verse. Primarily, there were two main people in the doc that were too greedy for their own good and came back to haunt them.
One of these people was Gerry Cotten, whose greed led him to gamble away millions of other people’s money. Clearly, one lesson here is to never gamble with other people’s money. But, the main thing to take from Gerry’s mistakes is that you should stop chasing losses. If you lose money, stop trying to re-invest to make back what you’ve lost. At that point, you’re no longer an investor; you’re a gambler.
However, the other individual that showed ample amounts of greed was Tong Zou. He was just a regular user with a regular job in IT, but he got jealous of seeing friends and other people get rich from cryptocurrency. What did he do? He took out a big loan and started investing.
Unfortunately, the crypto market crash happened just before 2018, meaning he started losing lots of money in investments. As a result, he sold his apartment and just managed to repay his debts after selling his crypto investments as well. This left him with $400,000 to his name – his whole life savings.
Instead of depositing this money in a bank, he sought to deposit it on QuadrigaCX as there was a deal that meant he could actually gain $100,000 by withdrawing it back out again. Sadly, this was when Gerry died, meaning he lost all of that money. His greed at wanting to make some quick bucks meant that he ended up losing his entire life savings. Don’t be greedy when you invest, and never chase your losses.
Lesson 4: Only invest what you can afford
Following on from the previous lesson, this documentary definitely exposed the importance of investing within your limits.
Both Gerry Cotten and Tong Zou are examples of crypto investors that invested more money than they could handle. Don’t take out loans to invest, and don’t invest money that you don’t have. You should always keep track of your finances and figure out how much money you can conceivably afford to part with when you invest in crypto. The idea is that you should be able to look after yourself and your family if the worst happens and you lose all of your investment.
In truth, the best way to know how much you can afford to invest is by speaking to a financial advisor. Look at the state of your finances and invest within the budget you’ve got. Don’t go crazy and spend money you don’t have because you’re keen to capitalize on rising crypto prices.
All in all, there is a lot to learn from this true-crime documentary. If you haven’t already seen it, it is worth watching as it does give some interesting insights into the crypto industry. Cryptocurrency is going to become a huge part of daily life in the future, particularly with the introduction of things like the metaverse. Consequently, it could be a good time to start investing – just ensure that you know what you’re doing and remember some of the lessons above.