If you are enamored with cryptocurrency, then you have bought the illusion, hook, line and sinker. For those of us who are still quite skeptical, we offer this as an additional analysis of Bitcoin, the original crytpo in the hopes of making some sense of it all. If the recent volatility in Bitcoin and other cryptocurrency markets wasn’t a true sign of there being a lack of a real market, then we do not know what will convince people they are dealing with complete uncertainty.
With the advent of cryptocurrency ETF’s now available to everyone, Bitcoin has now greatly increased the amount of money that it can attract. With no regulation on this supposed “asset class” the warning signs now show Bitcoin is more Pyramid scheme than a true Ponzi scheme.
What is needed most, which we are sure most crypto lovers do not want to hear, is actual official regulation. The other side of the equation that is desperately needed is for central banks to begin the process of creating a cryptocurrency that is central banking backed. This will remove the ability for certain kinds of schemes and other fraud to take place. It will also allow actual verifiable trading in such cryptocurrency and the futures of same.
Why a pyramid scheme you ask? Well look at the attributes of it. Now that there are actual ETF’s being offered that trade in Bitcoin and other fledging cryptocurrency, the power for these illusive rumor mongering investment crazed vehicles to attract a lot of capital is here. Take the current market for cryptocurrency and multiply by a factor of ten. If it wasn’t dangerous before it has now gotten to the point of overall ridiculous growth.
You see other tradable securities; well, they are backed by the actual company and its business. Take it from someone who traded for over twenty years, if there is nothing behind the security, why buy it right? Then there are currencies. Those are backed by countries, right? So, the chances of most countries disappearing well that is slim to none. What you are trying to do when trading currency is betting on the price of a currency at a certain time or against another country’s currency. Then there are the commodities and futures markets. That is where some great speculation happens, but again that is typically based on actual “things”. You know oil, soybeans, orange juice, coffee, sugar, gold, silver etc etc.
When it comes to Bitcoin, the only way for you to extract actual money from it is to find someone willing to buy the coins you are holding. So, it stands to reason that the someone would only be willing to ‘speculate’ on it if they thought there was a likelihood of the value increasing. Additionally, they will only be willing to buy your coins, if they think there is a possibility of someone else paying them for it when they decide to sell it. (you know that the price keeps increasing)
There would not be much interest in it, if the likelihood of selling it was non-existent right? If at some point, the possible purchasers of such Bitcoin dries up due to the fact that they do not believe there is the ability for the value to increase, and sell to someone else, they likelihood of the value holding or increasing is slim to none, and it would most likely crash altogether. (Any one who knows anything about trading knows this all to be accurate)
Taking it down to its infinitesimal level, the hype remains alive as long as everyone believes the value will go up. That is because the more the illusion becomes reality, the more people want it right? That is how one sells something. (This is true for the value of almost anything) Since Bitcoin is not actual currency and it isn’t traded anywhere where a real market is made, there are no regulations and no ability to cash in on your coins, unless someone else wants to buy it. Without that desire, you are somewhat shit out of luck. Hence the concept of a pyramid scheme. You must ‘recruit’ others who are willing to buy down the ‘chain’ in order to keep the value proposition alive and actually have someone to sell to.
What is more concerning to us, is it is completely illegal for a public company to hype its own stock, or for holders of such stock to hype their shares in any way shape or form, besides the normal course of presenting news to the market. In such situations people actually go to jail if they promote a stock just to keep the hype alive in order for their value to remain high or for them to sell. We ask you, what is different here? ABOSLUTELY NOTHING.
Of course, the current owners of Bitcoin want the illusion to continue, their ability to derive an economic benefit from owning it, is all based on the ability to get you to buy it. So that is why It is quite like a pyramid scheme because in the end, the one holding the most Bitcoins when the music stops loses. (You remember musical chairs) Now we are all for speculation, but legal and regulated speculation. Because if someone does any similar speculation on oil contracts, real estate, lending, or publicly traded stock, it is subject to the scrutiny of the Securities Laws. So should the trading of Bitcoin and other similar cryptocurrencies.
If not a financial disaster of monumental proportions is on the horizon. Make sure you are on the right of the side equation when it oc