Cryptocurrency: The Greatest Scam in History

In a pump-and-dump game, promoters “pump” up the price of a security creating a speculative frenzy, then “dump” some of their holdings at artificially high prices. Sounds all too familiar doesn’t it.

On top of this some cryptocurrencies are pure frauds with estimates being that 10 percent of the money raised for initial coin offerings has been defrauded and stolen.

The people that lose out are ill-informed buyers caught up in the spiral of greed. The result is a massive transfer of wealth from ordinary families to internet promoters and scammers. The adjective “massive” is a momentous understatement with 1,500 different cryptocurrencies now registering over $300 billion of apparent value.

It is important to understand what is meant by value. Promoters claim cryptocurrency is valuable as (1) a means of payment, (2) a store of value and (3) a thing in itself. None of these three claims are merely true.

1.Means of Payment. Bitcoins are accepted almost nowhere, and some cryptocurrencies nowhere at all. There are only a total of five online stores that accept bitcoin on more favourable terms than the US dollar. Even if it were accepted on a grander scale, a currency whose value can swing 10’s of percent in a single day is useless as a means of payment.

2. Store of Value. Extreme volatility in prive makes bitcoin and alternative coins undesirable as a store of value. With the storehouses which are the cryptocurrency trading exchanges are far less reliable and trustworthy than ordinary banks and brokers. It’s. for sure that it will not be running the Federal Reserve soon.

3. Thing in Itself. A bitcoin has no intrinsic value. The apparent value lies in people thinking other people will buy it for a higher price.

For the vast majority of uses, bitcoin has no role. Dollars, pounds, euros and yen are better means of payment, stores of value and things in themselves.

Cryptocurrencies are best-suited for one use: criminal activity. Because transactions can be anonymous, law enforcement cannot easily trace who buys and sells. As a result, the usage is dominated by illegal endeavours.

An example of this are the hackers who shut down the Kochs’ oil pipeline collected a $5 million ransom in cryptocurrency because they believed it to be untraceable.

Even ordinary buyers are flouting the law. Tax law requires that every sale of cryptocurrency to be recorded as a capital gain or loss. Most bitcoin sellers fail to do so. As a result of this, the IRS recently ordered major exchanges to produce records of every significant transaction that was done on the site.

In what rational universe could someone simply issue an electronic scrip and create, out of the blue, billions of dollars of value? And yet, even though that sounds crazy it was done right in-front of your eyes.

Bitcoin transactions are sometimes promoted as instant and nearly free, but they’re often relatively slow and expensive. It takes about an hour for a bitcoin transaction to be confirmed, and the bitcoin system is limited to 5 transactions per second. This is almost laughable compared to MasterCard’s 38,000 per second.

When you pay $42,000 for one bitcoin, or some tiny amount for a dogecoin or another altcoin that is even more worthless, you don’t get ownership of the blockchain technology. Instead, you get to use it to expedite your trade, which doesn’t make the underlying asset valuable. On top of this, there is not much evidence that blockchain makes actual business fundamentally faster, more frictionless or cheaper than alternative technologies which is the whole behind this in the first place.

All of this would be a comic sideshow if innocent people weren’t at risk. But ordinary people are investing some of their life savings into cryptocurrency which in essence is a massive pyramid scheme and scam if you really think about it.