Why do people lose money in crypto?

OK, so when it comes to investing in anything, there aren't really clear-cut rights and wrongs. People have made fortunes betting on penny stocks and shiny new cryptos that don't end up going anywhere in the long run. They were just lucky enough to get in and out at the right times. But most people aren't that fortunate.

Just recently, the Federal Trade Commission (FTC) announced that more than 7,000 investors lost over $80 million in cryptocurrency scams from October 2020 to March 2021. With so many people interested in cryptocurrency right now, it's easy for scammers to blend in with the crowd.

Because cryptocurrencies are stored in digital wallets and all transactions occur online, hackers are sometimes able to get hold of other people's cryptocurrencies, despite the security measures in place to prevent this.

Back in 2014, a Tokyo-based cryptocurrency exchange named Mt. Gox had to file for bankruptcy after hackers stole the equivalent of $460 million in U.S. dollars. And that's not the only time this sort of thing has happened.

If you lose the password to your cold wallet, you could lose access to your cryptocurrency permanently, even if you've got the wallet right in front of you. If you have a hot wallet -- one that's connected to the internet -- then you might have to worry about other people holding on to their passwords.