BITCOIN THE PERFECT SCAM: Price Does Not Reflect True Dangers Of Holding Bitcoins

(by Nadeem Walayat)  Bitcoin is as a SCAM by design as I have voiced many times over several months in that even when a large percentage of people have their holdings stolen the price is stable enough to continue to entice new entrants into exchanging hard earned fiat currency for bitcoins via the ramblings of the clueless mainstream press, investors who will also at some point lose the value of all of their holdings.

GUEST POST:  This is an excellent article by Nadeem Walayat, Editor at Market Oracle.  Many readers have asked my opinion on Bitcoin.  While I stated that I didn’t trust the crypto currency, I never really took the time to research it.

However, I came across this article and it is a MUST READ on the subject of Bitcoin.  Nadeem does a great job chronicling what he calls a “BITCOIN: The Perfect Scam.”

Bitcoin The Perfect Scam

by Nadeem Walayat,

The Bitcoin USD price has recovered strongly by more than doubling from the crash low of $240 of 16th February in the wake of the collapse of the worlds largest Bitcoin exchange MTGox (Magic the Gathering) that declared bankruptcy a couple of days ago, though the current Bitcoin market price of $560 is still half the $1250 high of less than 3 months ago.

Bitcoin Price Chart

Off course the price for the approx 800,000 bitcoins deposited at MtGox is not $560, instead the last price MTGox stated before the site went blank was $135 and more than likely near zero today, which highlights the real dangers of holding the bitcoin virtual crypto currency in that the only safe way to hold the virtual currency is OFFLINE which defeats the whole point of having a virtual currency.

For as soon bitcoin holders store their bitcoin wallets on an internet connected computer let alone try to actually transact and move bitcoins around then they are at real risk of total loss of their bitcoin holdings no matter what the notional values are said to be as thieves have been busy producing a whole host of bitcoin wallet malware that seeks to steal any wallets that they find on infected computers. Therefore the bitcoin price does not reflect the risk of the loss of bitcoin holdings as evidenced by what took place at MTGox which in effect vaporised approx 8% of the worlds total bitcoin supply so it is no wonder that the price is holding up, especially as most of the earlier mined bitcoins continue to be hoarded only to be slowly offloaded onto unsuspecting fools,

Given the ever expanding complexity of verifying transaction block chains means that the creation of each new bitcoin demands in a process that is termed as mining that now requires expensive dedicated boxes costing upwards of $20,000 to mine the same quantity of bitcoins that could have been achieved by a $1000 desktop PC of barely 3 years ago, ensures an ever greater cost will be incurred in obtaining new supply which is supportive of the bitcoin price. Instead what bitcoin holders are going to be increasingly exposed to is ever more sophisticated malware that are aimed at the theft of their bitcoin holdings at every stage of the processes starting right from their internet connected desktop PC’s to the interception of transactions between servers to the wild west bitcoin exchanges that can disappear with all of their customers bitcoin holdings overnight to the highly sophisticated bot net infected mining pools that seek to target all bitcoins in existence by seeking to rewrite who owns what.

Therefore bitcoin investors need to take the statements from highly vocal proponents of bitcoin who point to price recovery as a sign of stability with a mountain of salt as the price recovery just reflects LIMITED supply and NOT the risk of loss of holdings as ALL of the bitcoin exchanges could go bust taking most of the world supply of bitcoins with them which could ironically result in the price of remaining bitcoins RISING, just as the price of any fiat currency such as the U.S. Dollar would rise if a large percentage of its supply suddenly vaporised.

Bitcoin the PERFECT SCAM

Bitcoin is as a SCAM by design as I have voiced many times over several months in that even when a large percentage of people have their holdings stolen the price is stable enough to continue to entice new entrants into exchanging hard earned fiat currency for bitcoins via the ramblings of the clueless mainstream press, investors who will also at some point lose the value of all of their holdings.

As I have pointed out several times before bitcoin ultimately has a destiny with extinction because in order to continue verifying bitcoin transactions then bitcoin miners need exponentially greater processing power to achieve this, where today a bitcoin miner would need to invest in order of $20,000 to have any hopes of breaking even, costs that looks set to double every year where a decade from now break even mining operations would require an investment of more than $40 million which would imply far fewer mining pools that would in effect OWN the bitcoin craptocurrency and through the block verification process even be able to re-write who owns what.

Ultimately this means that the bitcoin mining will become the sole enterprise for criminal enterprises as no legitimate enterprise would be able to cover the costs of verifying bitcoin transactions (blocks) and thus earning new bitcoins, thus leaving bitcoin mining wholly to criminal gangs operating bot nets in control of millions of infected computers that would each mine fragments that would periodically be harvested by the bot nets.

So bitcoin holders don’t be surprised when you come to open your wallet.dat file that you find it is empty!

Bitcoin Exchanges are a Ponzi Scam

The bitcoin exchanges have been busy distancing themselves from MTGox as if they are something different, more trustworthy, when the truth is they are the SAME – NO DIFFERENT!

In fact you are all being duped for they are not really exchanges at all! They are NOT akin to the stock exchange or commodities exchange but just websites that some techies set up that may have started out honest but greed will get the better of them just as it did with MTGox because as MTGox illustrated the prices being quoted are meaningless, there is no volume!

Unregulated Bitcoin exchanges are the natural consequence of the crypto currency scams for their primary purpose is to entice new entrants to buy bitcoins that the exchanges say they hold. How do they achieve this ? They do it by producing fancy trading graphs that show the price of bitcoins as rising and being high which encourages the fools to send the exchanges their hard earned money that they will never see again!

This is what the exchanges do, they get fools to send them money for bitcoins that allegedly NEVER existed, this is why when MTGox went bust it stated that some 800,000 bitcoins disappeared when the truth is that they probably never existed!

It is as I warned several months ago a PONZI SCAM! The exchanges pay out those selling / transferring their bitcoins out with money from new investors as long as new investors are greater than those exiting the ponzi scam continues.

The bitcoin exchanges make it very easy to BUY bitcoins with them but make it near impossible to withdraw, transfer out, as their primary purpose is to suck as many investors into their vortex as possible. So watch this space for whether or not the authorities in Japan charge MTGox with being a Ponzi Scam.

The Anatomy of CraptoCurrency Scams

Take this as a concise guide as to how crypto-currency scams tend to work.

1. New crapto-coins craptocurrency is developed allowing the creator and his friends to easily mine approx 1/3rd of the total potential supply before going public.

2. Holders of crapto-coins agree to withhold their supply from the market before it goes public.

3. Start to promote the craptocurrency by handing out free crapto-coins to the media, with likes of Max Keiser at the top of the list to start pumping.

4. Crapto-coins start trading and immediately jump in price due to limited supply.

5. Illiquid crapto-coins have a high market capitalisation due to a high price and number of coins (not) in circulation which encourages more media exposure and interest.

6. Many fools jump on the bandwagon buying expensive hardware to mine crapto-coins given the high price per crapto-coins (over 90% of mined supply with-held from market).

7. Many websites appear that add the tag exchanges to them to give the air of authority that suck in entrants by producing graphs and data that gives the illusion of rising prices and volume of trading when in reality they are nothing more than Ponzi scams as they limit withdrawals.

8. As interest and prices continue to rise, the creator and his friends slowly offload supply onto the fools until the price crashes and the noobs have been bled dry or holdings vaporise MTGox style.

9. The crapto-coins hoarders wait for the dust to settle and noobs to be encouraged once more into buying as the price is stable and then repeat the dump and crash several times more.

That’s how Bitcoin and ALL craptocurrency scams work!

A reminder – YOU WERE WARNED!

29 Nov 2013 – Bank of England UK Housing Market Bubble Panic is Mark Carney Playing Game of Thrones

As was the case for the original Tulip Mania, following the bursting of the bubble Bitcoins will soon be forgotten and so will the craze for all peer to peer i-currencies, as the bottom line is that bitcoins never matched the hype for transactions are NOT anonymous and it IS heavily manipulated by a handful of mining pools so is not decentralised as today ordinary people cannot muster the processing power required to mine for bitcoins.

The bottom line is that bitcoins are a pyramid ponzi scheme where those who got in early win, whilst everyone else loses. If you own bitcoins then you should get out IMMEDIATELY!

05 Dec 2013 – Bitcoin Mania Bubble Bursts, China Triggers Price Crash Start, Technical Forecast

What’s Next for Bitcoins

A quick technical review of the charts implies that a double top pattern is being formed which is a warning that the bounce from the neckline is not something that bitcoin holders should put much hope into for the price is likely to reverse within days to break the neckline and retrace all the way down to at least 500 (current 1074), which is more than a 50% drop of the last price and a 60% drop from the high.

07 Dec 2013 – Bitcoin Price Crash Towards Zero? The Ponzi Scheme Bubble Plays Out as Designed

The bitcoin stepped crash with much volatility continues to play out not just towards my technical target of 500 but eventually towards virtually zero as represented by my longer-term objective of just 15, that is 1/99th of its trading high. So understand this that the nightmare for those who continue to hold onto bitcoins is only just beginning, yes the price has crashed by 37%, but it is still stands 37% above its technical target of 500 and has the potential for a 96% loss of its current value should the target of 15 be realised, so this is NOT the time to hold on hopes of recovering back towards the highs as the loss of value sustained could literally be TOTAL! A lesson that all market traders have to learn else they will go bankrupt holding on for price recoveries that always become more distant with each stomach churning lurch to the downside.

Bitcoin Crash

16 Feb 2014 – Bitcoin Craptocurrency Ponzi Crash Grinds Towards ZERO, Where’s Max Keiser Hiding?

Bitcoin Craptocurrency has plunged to USD $230, down 81.6% from its USD $1250 highUnfortunately for bitcoin holders the ponzi scam crash continues to play out as holders of bitcoins find out that as is the case with all scams that when they want to sell their holdings they CAN’T. Instead they are locked into holdings that continue collapse in value all the way towards a pittance of the price that hooked them into buying of just a few months ago.

Slovenia, Bulgaria, Romania, and such like places where the now effectively frozen bitcoin exchanges operate from should have been a big signal for SCAM ALERT! Even the big exchange at Tokyo remains frozen as hackers, crackers, and cyber attackers dictate the real value (if any) of the craptocurrency.

The current ‘price’ of Bitcoins is USD $230, though off course the price is absolutely meaningless if one cannot actually trade at it ! Which is the case for many bitcoins holders today, as they will only be released form their bitcoin torture when the value of their holdings has been effectively wiped out, stolen by those that constructed and maintained the ponzi scam that hooked many unsuspecting naive investors into its vortex amidst an avalanche of sales propaganda that was liberally regurgitated at length by worthless mainstream media that painted a picture of Bitcoins having come of age when the truth was of the scammers final price spike.

20 Feb 2014 – Bitcoin Craptocurrency Price Crash Accelerates to MTGox $112, Destiny with Extinction

The bottom line is that bitcoin has a destiny with extinction! Yes, they will at some point cease to exist and all of the perceived value will disappear in a puff of smoke!

25 Feb 2014 – Bitcoin Ponzi Scam Crash Update – MTGox Vanishing Act, Who Will be Next ?

Who will be next?

Meanwhile the worlds other major Bitcoin exchanges that are usually located in the wild west of poorly regulated countries have been busy issuing reassuring statements to their own holders of bitcoins just as MtGox had been doing for several weeks before performing its vanishing act.

To be blunt, someone would have to be really dumb and therefore deserve to lose all of their money if they thought that MtGox was an isolated incidence. Have people learned nothing from the financial crisis ? When Northern Rock went bust was it an isolated incidence? That’s what the central bankers told us! When Lehman’s went bust the politicians and central bankers told us it was an isolated incidence.

What was the truth?

The truth was that ALL of the banks were bankrupt! They were ALL BANKSTERS, all as bad as one another.

So the answer to the question as to who will be next ?

ALL OF THEM! Just as took place during 2008, watch for ALL of the dominoes to tumble!

Source and Comments: http://www.marketoracle.co.uk/Article44647.html

Nadeem Walayat

http://www.marketoracle.co.uk

Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem’s forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook’s in the The Inflation Mega-Trend and Stocks Stealth Bull Market series.that can be downloaded for Free.

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44 Comments on "BITCOIN THE PERFECT SCAM: Price Does Not Reflect True Dangers Of Holding Bitcoins"

  1. Lurked here for years. I’m not even a bitcoin true believer but that’s a terrible article. Bitcoins are a solid technology, not a scam. They will fail eventually though, because the entire internet and world trade is going to fail.

    It’s really not hard to secure bitcoin. Cold storage. Bitcoins are still in the early phase so you can’t expect computer noobs to be able to secure them. Just like they can’t secure anything on their computers.

    Mtgox has been having problems for years…anyone with coins there was lazy or was trying to arbitrage and got caught. It’s easy for exchanges to prove their reserves, and there is a trend in the direction of proving reserves. I had no problem cashing out my coins on other exchanges.

    He doesn’t understand how mining works. Asic mining was a a one time thing. The price increase is greatly outpacing the reward halving greatly. Miners work on transaction fees. Electricity cost is the real limiting factor

    Nadeem is a derivatives trader? Lovely. Exter rolling in his grave. Regulation will solve everything Nadeem

    • Ww true.

      Mr. Walayat’s latest article covering the “Crimea Crisis” is VERY one sided. The descriptive adjectives he uses likens back to the Eisenhower/Nixon eras, where there was a mean, dastardly communist hiding behind every tree and shrub! Paranoia strikes again!

      Crypto-currencies are here to stay. The globe has been using them for some years now in one form or another, including central banks, such as the IMF. What is an SDR (special drawing right) except a form of crypto-currency? BitCoin is just the ‘tip’ of the spear in this movement to a total digital financial environment.

      Nadeem Walayat vociferously attacks BitCoin and the Crimean situation with equal fervour. His arguments are based in false assumptions, that have their root in his opinion.

    • ” Regulation will solve everything ”

      This tells me that you do not understand bureaucracy.

  2. Solid points Dr.Wu,

    while Walayat runs an excellent macro-financial site, in his own writings of late he’s definitely jumped the shark. His take on Russia-Ukraine, for example, reads like a soundbite of a State Dept neo-con news release. And here his rantings serve little more than to drive home the truth of that old maxim -a little bit of knowledge is a dangerous thing!

    But an article on bitcoin serves as the perfect followup to the previous piece here. Because of some similarities in the guiding philosophy of pm bugs and bitcoin believers(privacy, anti-state, alternative currencies, etc.,) one’s attitude towards Bitcoin serves as a test of the capacity for self-reflection.

    If, as so many of the hard-core HARD MONEY advocates do, we dismiss it as a “ponzi” – pointing out the classic signs a bubble where initial adopters cash out on the broken dreams of late arrivals – yet remain oblivious to the manner in which the precious metals were subject to similar pumping by those who required new entrants to buy in so as to inflate the value of their holdings – then the unbiased onlooker gets another reason to dismiss the metals community as self-serving troglodytes with an agenda transparent to all save themselves.

    Though it’s easy enough to blame the very low level of interest in gold/silver in western lands on MSM propaganda, or the citizenry being ‘bubbleheads’…. the sad fact is that metals investment has remained a hijacked preserve of factionalists who have spurned all alliance with the outside world in favor of insulating themselves in a cocoon of disdain for any view except their own. On sites where they are in the majority, they regularly shunt all diversity of viewpoints on alternative currencies to the sidelines, and dismiss all dissenters from their dogma as “trolls” -.gov sock puppets, or morons. Given their incapacity to see how cultish and silly this seems to everyone outside of the anthill, the pm bugs are reduced to endless moaning about manipulations and manipulators… thereby wallowing in their victimhood. Hardly a way to build the perception of being on the winning side!

    While I don’t really share Steve’s belief that a large increase in the number of people investing in the precious metals in the west would inevitably drive prices upwards…. and overcome the perceived ‘manipulations’ of the markets… if you are going to argue that case, then it seems kind of important to identify all the factors which operate as a brake on that demand… instead of the very selective sort of sleuthing that the consensus gold/silverbug cultist insists upon.

    All successful movements gain their traction from the ability of participants to forge alliances between disparate parties who may differ widely in their perspectives, yet put that aside in order to achieve a common end. It’s way overdue to take the debate back out of the hands of those who have done much the same as what they excoriate the bitcoiners for doing…

    and make the case for the metals one that is free of all the baggage which weighs it down at present.

  3. “So understand this that the nightmare for those who continue to hold onto bitcoins is only just beginning, yes the price has crashed by 37%”

    Every Bitcoiner I know made upwards of 8000% in 2013.

    You need to check your numbers Mr. Luddite paper trader.

    • fredq,

      The more I have read and watched videos on Bitcoin, the more I AGREE with Nadeem… that Bitcoin is nothing more than your typical RUN OF THE MILL PONZI SCHEME.

      I don’t know why I didn’t look into it sooner. So the first SLOBS that produced 6 million Bitcoins for next to nothing make the Big money and the JOHNNY-COME-LATELY SLOBS at the end make peanuts or worse… LOSE THEIR SHIRTS.

      steve

  4. Bitcoin is not Gold or Silver nor is gold and silver like Bitcoin.
    There are 4 main PM Gold, Silver , Platinum, Palladium nobody will ever invent a new one thats for sure.
    There are around 100 crytocurrency existing already.
    http://coinmarketcap.com
    So anytime there could be a switch in marcetcap from bitcoin to let say lightcoin or Maxcoin for example. So you must follow the market closely to see if you in the right coin.
    But crypto coins have one advance to PM you can send them fast and easily around the globe just like an email. You can’t do that with PM. So crytocurrencys are a great thing for making especially small payments over the net. The usage of crytocurrencys is dependent on a working Internet. Gold and Silver will function as money even the hole system is down.
    As I see the the world getting closer and closer to a catastrophic outcome I don’t have enough trust to put large amounts of money into bitcoin or similar. For daily payment over the net they are a great thing just be careful were you exchange to fiat and hold them on your own secured hardware.

  5. I think this “YouTuber, blogger, and writer make s some good points on Bitcoin.

    http://dont-tread-on.me/?p=31861

    If someone doesn’t like “scam” or “Ponzi” attached to the topic of Bitcoin, how about highly speculative, risky, subject to hacking, etc.?

  6. Federal Reserve Notes may just be paper. They may not have the “draw” of metals. But every one that I know accepts them as legal tender. Bitcoin, not so.

  7. SRS I’ve read a lot of your silver stuff, but your credibility really took a hit with me after you called this a “must read.” This is one of the worst articles on bitcoin I’ve ever seen.

    Bitcoin is complicated to understand so I guess it lends itself to FUD, but this is ridiculous.

    • gustavsuare,

      UPDATED COMMENT: After hours reading and watching videos on Bitcoin, I am now convinced more than ever… it’s just another lousy Ponzi Scheme. I hate to be ignorant of something… but it didn’t take long to figure out Bitcoin.

      Hell, even the supposed originator of Bitcoin is saying he had nothing to do with it…LOL.

      WATCH OUT POOR SLOBS who are BAG-HOLDING worthless Bitcoins.

      steve

      • Great article written by someone who understands scams. Contrary to your detractors SRSrocco my already high opinion of you has been enhanced by presenting this fine well written article by Nadeem Walayat. I have always been a big fan of your well researched articles and your lack of trust in bitcoin places you in good company. Here is another sober and well written article by Brandon Smith about bitcoin: http://www.alt-market.com/articles/1921-bitcoin-the-sexiest-non-solution-of-all-time

        • bb,

          Appreciate the kudos. Interesting article you linked. I also thought Nadeem did a good job on the bitcoin scam. After reading Brandon Smith’s article on Bitcoin… I understand the situation more clearly.

          I recommend this video from another person calling Bitcoin a Ponzi Scheme:
          https://www.youtube.com/watch?v=9kcVug19Wyo

          The problem I have with Bitcoin is that it contains no true ECONOMIC ENERGY. It’s random. Gold and silver cost a certain amount of (energy) fiat currency to produce each ounce. You can trade these coins for goods and services locally if things get rough.

          Bitcoin is at the mercy of a functioning internet and electric grid. Not at all part of the localization of the world after globalization dries up and blows away.

          steve

          • Steve, I tend to you agree with you. No intrinsic value says it all.

            However, I don’t disregard the excitement that goes into it and maybe some brilliant young minds that will be all over this idea, and also its potential disruptive nature to the “Fed”. And the race for faster processing speeds could have spin-off effects.

    • Why don’t you show us some of your brilliant analysis while you’re at it?

  8. My Bitcoin stock is up 12,000%. Oh, you didn’t know you can buy stock in bitcoins? I have already cashed in some of mine for a nice profit.

    🙂

  9. So SRS, you right this article and admit that you are ” totally ignorant of Bitcoin. Of course, I could spend the time researching it, but I have been too busy researching the diverse subject matter for my site. ”

    I can’t even begin to understand then why you would write it. BTC doesn’t pose a danger to metals. I have both. BTC defeats capital controls… try carrying a monster box on board the next plane out of the country. Let me know how that goes. It also allows countries that are blackballed (for whatever reason) by the banking cartels to trade (accept / send payments) to others.

    Yes exchanges are obviously weaknesses… if you have all your BTC in an exchange it is no different than having all your fiat in a bank.

    • Solution,

      Ditto on the Bitcoin ignorance.

      Wrong on assumption that I wrote the article.

      It was a guest post written by Nadeem Walayat. I thought I made that clear in the beginning.

      steve

  10. I wonder if the author of the article has proof that the inventors of the cryptocurrency acquire 1/3rd of the total potential supply before it goes public and on to pump and dump. Is this just speculation?

    Anyway, I don’t see what’s to prevent somebody with a ‘Ctrl-Delete’ button somewhere on the web.

    Not that different from you bank account I guess: http://www.youtube.com/watch?v=-DT7bX-B1Mg

  11. As someone who has studied Bitcoin in depth, goes to Bitcoin meetup groups and talks to experts in Bitcoin on a weekly basis, this is without a doubt one of the worst Bitcoin articles I have personally ever read.

    There really is no excuse for this. I have never met anyone who can genuinly follow up on there claims that Bitcoin is a scam or a Ponzi scheme with any rock solid information to show it as so.

    The Bitcoin protocol represents a huge leap in technology that has never before been achieved by allowing a distributed asset ledger that needs no central control. It has the potential to be the most disruptive technology ever created with maybe the exception of the internet.

    Here is a great video series accessible for begginers that will explain the underlying technology that gives Bitcoin its value.

    http://youtu.be/O0oDDIy0P2s

    Its the underlying technology (the protocol) that gives Bitcoin its value because of its utility which is genuinely incredible.

    • sharky,

      I stand by Nadeem’s article 100 PHAT PERCENT.

      steve

    • Sharky,

      Your Bitcoin comments remind me of the Captain of the Titanic, when informed that the ship was sinking. “Sinking”? He shouted. “Don’t be foolish. This ship is unsinkable”!

      Good luck trusting your tangible wealth to bits & bytes!

  12. Terrible article. Relies mostly on typeface changes and ad hominem attacks, but poster definitely needs to visit https://yourlogicalfallacyis.com to cover everything. To detail all the fallacies would require a work at least as long as the original piece.

    • maxblockm,

      I disagree. I spent most of the day looking into Bitcoin, and it didn’t take me long to figure out it is nothing more than a PONZI SCHEME. I am surprised that there are so many die-hard fans of Bitcoin.

      But, on the other hand, its not really all the surprising. All the Ponzi schemes throughout the history of mankind… those involved never saw the crash until it was too late.

      Nothing changes, except the Ponzi’s today are more high-tech and fancy.

      steve

      • There’s lots not to love about Bitcoin, but it’s hard to see how the “ponzi potential” of it should be first on the list. After all, most every element of the hyper-financialized western economies is a potential ponzi scheme -or some kind of trap that unwary “bagholders” are going to be the victims of….

        from stocks to bonds, crypto-currencies to bank balances, pension funds to government savings plans, it’s a jungle out there; either the state or ‘pirate’ enterprise is waiting to grab the wealth of the befuddled citizenry at every turn.

        Many of those who see crypto-currencies such as Bitcoin as a means of escaping these calculated conspiracies to defraud are given over to the idea because of it’s ‘cutting edge’ appeal – for them, gold&silver are simply too clunky, old fashioned, and haven’t the badge of novelty and early adopter status.

        They should be welcomed to try out these ‘free enterprise’ alternatives to the fiat system… as there is no better way of learning what fire is than getting one’s fingers burned. Behind the apparent anonymity and de-centralized structure of ‘peer to peer’ transfer may lie an agenda of electronic currency control which will advance the arrival of an Orwellian dystopia that this variety of “bagholder” believed they were escaping.

        Holders of physical gold&silver should not be able to expect to look on smugly however… the moneypowerz appear to have a plan for everybody, and an intention to see to it that no one remains sovereign or solvent in the future that they have planned. Merely holding metals, and expecting to thus be somehow free of the systems’ malevolent control is like building an insurmountable barrier on three of the fours sides of one’s property, and then daring the bad guys to try and get in!

        • Rogue,

          I have no problem with the theory behind of Bitcoin. Still doesn’t change the fact that it’s a Ponzi Scheme.

          Who knows what the future holds. Anything and everything can happen. That being said, I still think gold and silver are the best fundamental physical assets to own in the future.

          Lastly, LESS technology not MORE is where we are heading. This spells certain death for this sort of crypto currency. There’s a lot of people out there who have traded one religion for another one with more pizzazz — technology.

          Unfortunately, technology will disappoint in the future.

          I didn’t start this website to CONVINCE others, but rather to put out the information and data that I believe in. I will let the CARDS FALL AS THEY MAY.

          steve

          • A Ponzi scheme is centrally controlled where early investors are paid out with profit that comes directly from the money of new investors. Thus new investors are always needed or the scheme collapses.

            Bitcoin is a finite currency that goes up in value on supply and demand. The more people invest, the more the underlying currency goes up in value. The early investors who took massive risk have made a lot of money on the assets they purchased, just like early investors in any other share, company, etc would. But even if no new investors came in now, it would not collapse like a Ponzi scheme the price would just not move until new investors came in.

            I don’t know where you spent 1 day learning about bitcoin to come to the conclusion you have but if your going to post things about Bitcoin I would recommend you do your due diligence (more than 1 day research) and find out the facts like you do with your excellent precious metal analysis.

          • sharky,

            While it seems like I am making a rash decision, certain things make Bitcoin a target right off the bat. Doesn’t always take a long time to figure something out.

            I don’t want to waste my time on Bitcoin because I believe it will do itself in on its own accord. As I have written over and over, we are peaking in oil production and soon natgas. The world needs a growing energy supply to keep all this technology running.

            In addition, advanced technology needs globalism to work. It takes something like 50 countries to put together a SMART PHONE. This includes all the metals, materials, labor and etc. When PEAK OIL really takes place, Globalism goes the other way. No one sees this… I am quite surprised.

            Furthermore, I think it is possible that we experience a SHARK-FIN type of decline in Global Oil Production. The more complex the system and the more technology will become a burden in this environment.

            I have stated that “Electronic Money” of any kind will not stand the test of time. There are many black swans coming and one has to do with the climate which I have not written much about. The climate will also impact infrastructure and technology just as much as peak oil.

            This will be discussed in my THE U.S. & GLOBAL COLLAPSE REPORT.

            steve

          • roguefaction | March 18, 2014 at 10:03 am |

            Steve,

            I believe we may be seeing the evidence of that generational divide I referred to previously…

            most of these guys commenting here who are bitcoin friendly had learned more about computers and associated stuff by the time they were 15 than we old farts(let’s say, anything north of 50)will ever know.

            Of course, what we know that they don’t, is that a) they are not immortal, or all-seeing, and the rest of the stuff we all believed when we were of a certain age… and b) that very seldom does anyone ever listen to and benefit from the advice of someone who has gone through the same life experiences and could tell them how to avoid many mistakes- I know I certainly didn’t, much to my chagrin now!

            One of the few perks of advancing years,along with being able to slow down and enjoy the little things in life that too often get lost, is the acquisition of a sense of humility, in addition to mortality.

            Most of the bitcoin supporters here seem to have at least a peripheral interest in the precious metals, in addition to your EROI thesis…

            that in itself is an example of the ground for the kind of developing coalition of disparate parties which I suggested needs be formed for any serious traction to develop in opposition to the coming PLANNED dystopian nightmare. I noticed that some of them have said that nobody who knew what they were about needed to get “MTGOXED” – or needs lose much sleep over bitcoins’ future. For all we know, they might be right.

            Or we skeptics could be correct! Who knows? While I personally share your opinion about technology and the future, for me, that’s a gut feeling… not a thought out position I can enunciate and defend. If you have advanced in that direction beyond my feeble effort, it would be a very interesting subject for a subsequent post here! On the other hand, if it’s a matter of allowing our personal bias to be over-ruled in order to acquire a new perspective on something like crypto-currencies, 3D printing, and the like… they best take I have read on why Bitcoin is doomed ironically was authored by none other than your bud, “MR BRAINIAC” Shelby Moore the third… I need to dig through some old emails to find that!

            If all of us with an interest in maximizing our chances of survival in tumultuous times can agree to emphasize our points of agreement, instead of where we differ, and in doing so, learn from each other, there’s simply no telling what profit can be mined from the exchange!

            At the very least, maybe they will stop calling us Luddites!!!

          • Rogue,
            I agree that the new generation can run circles around us as it pertains
            to computers and technology. However, that will come as a disadvantage in the future.

            The DETAILS on why this is so, will be explained in my upcoming paid report…. THE U.S. & GLOBAL COLLAPSE REPORT.

            I believe once an individual reads the report, they will see more clearly of the dangers lurking ahead. Advanced technology will not be your friend at this time.

            That is why I believe Bitcoin is just a passing FAD. Here is how I am going to leave the subject of Bitcoin. I am not going to support or deny its use. I am just going to ignore it.

            If readers on my site are big into Bitcoin… fine, but I don’t believe it is a viable system for the mid-long term. I rather see people buying property and learning how to grow their own food rather than spending time playing around with another HIGH-FALOOT’N Gadget that will not be around when the U.S. & Global financial system collapses.

            steve

  13. Bitcoin’s usefulness and value does not depend on an ever increasing supply of bitcoin via mining (as the article implies) so the whole paragraph under “Bitcoin the PERFECT SCAM” is BS.

    Also, it requires a tremendous amount of energy and hardware investment to mine bitcoins. Big organizations that can afford $40,000 clusters are not getting bitcoins for free. They are paying $40,000 for a cluster hoping for ROI.

    Mt Gox was a legitimate exchange. You could buy and sell real bitcoins on that exchange, remove them from the exchange, and buy real goods with them. I suspect it is one of two reasons the exchange failed. They were either hacked or they knowingly left a back door open in their system so that one of the Mt Gox owners could steal the coins.

    Bitcoins trade just like a stock. The price or exchange solvency does not depend on an ever increasing number of people using the exchange. The author might as well proclaim that the entire stock market is a ponzi scheme and draw examples of pump and dump penny stocks and fraudulent companies like Enron. However, the author should probably read the definition of ponzi scheme first.

    This article is utter garbage. The verbiage supporting the thesis is misleading, it is completely sensational, and offers very little in the way of information. The only valuable part of this article is where it talks about cold storage and also under “The Anatomy of CraptoCurrency Scams” where it describes the myriad of pre-mined altcoin cryptos that sprouted up after bitcoin’s massive run.

    • “Mt Gox was a legitimate exchange. You could buy and sell real bitcoins on that exchange, remove them from the exchange, and buy real goods with them. I suspect it is one of two reasons the exchange failed.

      They were either hacked or they knowingly left a back door open in their system so that one of the Mt Gox owners could steal the coins”.

      In your reply defending bitcoin you point out a major weakness in it that isn’t just in the past. Hacking and insider stealing…does anyone think that will never happen again?

      • My goal was not necessarily to defend bitcoin. I know that anything on a computer can be hacked or accidentally deleted. What I was trying to do is point out the lies in the paragraph titled “Bitcoin Exchanges are a Ponzi Scam” where the author claims that there was no volume and there were no real trades going on, no bitcoins exchanged hands, and the bitcoins that were stolen never existed. Those are all lies. Real people traded real bitcoins on Mt Gox. I had bitcoins on there. I was able to move them off the exchange onto another exchange and buy other crypto-coins with the bitcoins I got from Mt Gox. That paragraph and the one titled “Bitcoin the PERFECT SCAM” show that Nadeem has no regard for facts and that he has an agenda to bash bitcoin. He’s nothing but a shill.

  14. NotQuiteALuddite | March 18, 2014 at 4:59 am | Reply

    Steve, your work is excellent. Glad to see you are taking a stand on this issue.

    If its not a ponzi scheme, its at the very least a classic pump and dump.

    It almost makes me laugh to think about people chasing a digital dream in an energy starved future.

    The crypto bubble has already burst… everyone who was going to buy already did, there will be no rush into BTC by the general public. Most could never even get bitcoin-qt installed and sync’d up with the blockchain, let alone figure out how to actually spend a Bitcoin or keep their wallet safe. EmptyGox has ensured that Bitcoin exchanges and online wallets will not likely be trusted going forward by the public.

    We live in a world where Microsoft could take complete control of 90% of computers tomorrow via an automatic update and the government installs surveillance equipment into your computer as it is being shipped to you. And we are supposed to store the fruits of our labor using these things?

    Oh, and don’t even get me started on the technical flaws…

    “While ECDSA is indeed not secure under quantum computing… Bitcoin’s security was designed to be upgraded in a forward compatible way and could be upgraded if this were considered an imminent threat.”
    https://en.bitcoin.it/wiki/Myths#Quantum_computers_would_break_Bitcoin.27s_security

    “The future ability of quantum computers might be a decade or two away, their future ability to break public-key cryptography has important implications for the encryption of highly sensitive information today. For these applications, we must already design new public-key cryptosystems and one-way functions that are immune to quantum cryptanalysis.”
    – 2004, A Quantum Information Science and Technology Roadmap (http://qist.lanl.gov/pdfs/qc_roadmap.pdf)

    You’re doing great work Steve, thanks for the awesome research.

    • NotQuiteALuddite,

      Glad you find some of the information on this site useful. I have to get a kick at the Hedge Funds & Large Investors bragging on how they are buying up Real Estate. Real Estate will be a dead market in the future (for the most part). There are so many wealthy individuals and large funds presently investing in some of the worst assets possible.

      The majority of supposed paper & physical assets going forward will become CAPTIAL SINKS. You put your fiat currency in… AND IT GOES DOWN THE DRAIN.

      The Global Oil Industry has spent a fortune in just keeping PRODUCTION FLAT. The oil majors are finally waking up that this is a LOSE-LOSE proposition. They are cutting back on CAPEX in 2014, and I believe it will continue to get worse each year.

      This should do WONDERS for speeding up the PEAK & DECLINE of global oil production.

      steve

  15. When will your paid reports be available for purchase Steve?

    How long is each report?

    • NewRpt,

      My web designer has already completed the new REPORTS PAGE system. I am currently finishing up one report and working on the other as we speak. Here are the two reports to come out first, with more to follow in the next several months:

      1) THE U.S. & GLOBAL COLLAPSE REPORT

      2) THE REAL COST OF MINING SILVER

      The first one, THE U.S. & GLOBAL COLLAPSE REPORT (30-40 pgs) is a paid report and I have a basic figure in mind, but have not decided on the exact amount. However, it will be close to the price of a silver dollar.

      The second report, THE REAL COST OF MINING SILVER (15 +/- pgs) will be free. It will provide information on the real cost to produce silver not found anywhere else on the internet (to my knowledge).

      Furthermore, I will not require an individual to enter in their email address to access the free report. While this may be the common practice of the majority of Financial & Precious Metal Internet Sites… it will not be my business model.

      When I provide a FREE REPORT… its FREE with no strings attached.

      I understand that these Internet publishing sites build their businesses by expanding their “EMAIL ADDRESS” data base, but I don’t want to go down the road of sending out junk email. I think the public is growing tired of that sort of practice.

      I believe in putting out the best quality and most original information and data as possible. If an individual sees merit in that service, then they will feel inspired on their own to purchase it.

      My hope is to have both reports finished in the next two weeks. Furthermore, I am working on upgrading web service as my traffic has increased substantially in the past two months.

      Thanks for the interest and look for the new REPORTS PAGE located where the MEMBERSHIP TAB is now located on the navigation bar.

      steve

  16. It’s been a good thread , i do love your analysis SRS.

    As a bitcoin investor I would never inform someone to give up there precious metal for bitcoin, I think they complement each other well in a portfolio as a inflation and fiat currency collapse risk hedge

    Applying deglobalisation and Declining EROI to the bitcoin world is something I have not seen much of, I guess a lot depends on how the world adapts to a post peak oil world in terms of energy innovation and bilateral trade when the shit hits the fan in order to maintain the technology infrastructure.

    It opens up a lot Of questions and possible outcomes.

    • Sharky,

      Here is the BOTTOM LINE:

      The majority of our industries DO NOT PRODUCE ENERGY…. they consume it. Every sector of the economy for the most part is a CONSUMER OF ENERGY. We need at least a 3/1 EROI of oil just to support and maintain the transportation industry and road infrastructure.

      Then if we want Food, Housing, Retail, Education, Healthcare, Entertainment and etc… we need to TACK ON AN ADDTIONAL 1-2 EROI for each. Each industry and sector consumes a barrel or more of that surplus EROI.

      Our modern economy needs something north of 10/1 EROI just to survive. SHALE OIL & TAR SANDS at 4-5/1 EROI don’t CUT THE GRADE even though they have assisted in filling the gap in declining oil production.

      Lastly…. the more complex the technology… THE HIGHER THE EROI. The RISE & FALL of technology will rise & fall with the EROI.

      steve

  17. Finally found the old stuff by Shelby on Bitcoin…

    including this piece on Wayalat’s own site – http://www.marketoracle.co.uk/Article39704.html – from May of last year… in which he argues from a much more informed and balanced perspective than Nadeem as to why it is neither decentralized, anonymous, nor in any way like gold… as in the physical metal… in it’s attributes.

    Also, from another thread, this quote from “Impaler”… which Shelby wholeheartedly endorsed… characterizes Bitcoin as not a “ponzi” but rather a “pyramid” scheme…

    “The main distinction is that Pryamid schemes are normally decentralized or at least the ‘center’ is constantly in motion, were as as Ponzi scheme always has it’s money flowing through one individual which is the linch-pin of the whole thing. In a sense the rebuttal that BTC is not a Ponzi because it is decentralized it true, but this not mean it is not a scam, it’s just a different kind of scam. Believe it or not humans invented decentralization before Peer-2-Peer software and have used it for scams for a long long time, but naivete people always thinks that anything with the glow of Technology on it is new and revolutionary and none of the obvious lessons of history apply.

    Most Pryamid schemes involve a recruitment quota for each new member both directly and indirectly as their recruits recruit more in an exponential growth. Eventually people who reach the quota are automatically cashed out and the Pyramid they were in fissions as the 2nd Tier members become the next in line to be cashed out when their pyramids reach completion. Another key distinction is that while a Ponzi scheme always involves the ringleader lieing about what they are doing, a Pyramid scheme often WILL disclose EXACTLY how it works to everyone involved, after all in a decentralized system everyone needs to know the ‘DNA’ of the scam to perpetuate it. The problem is that greed and a lack of ‘categorical imperative’ (aka failure to think about the systemic effects of everyone acting some way) in most people moral thinking allow them to blithe-fully engage in the Pyramid activity without actually believing it is fraudulent.”

    Couple of years ago, Turk’s GoldMoney was offering a service of allowing goldgrams to be used for transactions between private parties which was really promising… until they were forced to shut it down!

    Is it not interesting that a service offering the chance to trade in something closer to ‘real’ gold was apparently more of a threat to the system than Bitcoin…. which has not suffered the same intensity of governmental interference?

  18. I tried to read this article seriously but all I saw was… crap crap crap craptocoin scam crap crap

    it sounds like the writer is too emotional about it to me.

  19. Disappointing SRS – I like your stuff for being objective.

    But this article smacks of being Juvenile and not founded on any real facts.

    Please stick to what your competences – it is a big mistake to try to be an authority in other areas you do not really understand

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