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This is a post by Bill Harris, former CEO of Intuit and founding CEO of PayPal and Personal Capital.
I'm tired of saying: "Be careful, it's speculative". So, "Be careful, it's the game of chance". So, "Be careful, it's a bubble". Okay, I'll say it: Bitcoin is a scam.
In my opinion, it's a colossal pump-and-dump scheme, which the world has never seen. In a pump-and-dump game, the promoters "pump" the price of security by creating a speculative frenzy, then "dumping" part of their holdings at artificially high prices. And some cryptocurrencies are also frauds. Ernst & Young estimates that 10% of the money raised for initial coin offerings has been stolen.
Losers are poorly informed buyers involved in the greed spiral. The result is a massive transfer of wealth from ordinary families to internet promoters. And "massive" is a huge euphemism: 1,500 different cryptocurrencies now register over $ 300 billion of "value".
It helps to understand that a bitcoin has no value.
The promoters argue that cryptocurrency is as valuable as (1) a means of payment, (2) a store of value and / or (3) a thing in itself. None of these statements is true.
1. Means of payment. Bitcoins are accepted almost anywhere and some cryptocurrencies do not exist at all. Even if accepted, a currency whose value can fluctuate by 10% or more in a single day is useless as a means of payment.
2. Value shop. The extreme volatility of prices also makes unwanted bitcoin as a store of value. And the warehouses – the trade of cryptocurrencies – are much less reliable and reliable than ordinary banks and brokers.
3. What in itself. A bitcoin has no intrinsic value. It only has value if people think that other people buy it for a higher price – the theory of the Higher Fool.
Some cryptocurrencies, like Sweatcoin, which is redeemable for training gear, are the equivalent of online coupons or frequent flyers – a purpose best served by simple promotional codes compared to complex cryptography.
In fact, for the vast majority of uses, bitcoin has no role. Dollars, pounds, euros, yen and renminbi are better means of payment, deposits of value and things in themselves.
Cryptocurrency is more suitable for use: criminal activity. Because transactions can be anonymous, order forces can not easily track who buys and sells – its use is dominated by illegal attempts.
The heaviest bitcoin users are criminals, like Silk Road and WannaCry ransomware. Too many bitcoin exchanges have suffered spectacular violence, like NiceHash and Coincheck, or even fraud like the Monte. Gox and Bitfunder. Too many initial offers of coins are scams: 418 of the 902 ICOs in 2017 have already failed.
Hackers are taking note. It is estimated that 90 percent of all remote hackers are now focused on bitcoin theft, commanding other people's computers to extract coins.
Even ordinary buyers are violating the law. The tax law requires that every sale of cryptocurrency be recorded as a capital gain or loss and, of course, most bitcoin sellers fail to do so. IRS recently ordered an important exchange to produce records of every significant transaction.
Yet, an important bitcoin promoter from Silicon Valley proclaims that "Bitcoin is about to transform the company … Bitcoin has been very resilient." He remained alive during a very difficult period where there was the chaos of the Silk Road. , when Monte Gox stole all that Bitcoin … "He claims that the criminal activity shows that the bitcoin is strong. I would say that shows that bitcoin is used for criminal activities.
Bitcoin transactions are sometimes promoted as snapshots and almost free, but they are often relatively slow and expensive. It takes about an hour to confirm a bitcoin transaction and the bitcoin system is limited to five transactions per second. MasterCard can process 38,000 per second. The transfer of $ 100 from one person to another costs about $ 6 using a cryptocurrency exchange and well under $ 1 using an electronic check.
Bitcoin is absurdly wasteful of natural resources. Because it's so intensive in computing, it takes a lot of electricity to create a single bitcoin – a process called "mining" – as it does to feed an average American family for two years. If bitcoins were used for a large part of world trade (which will not happen), they would consume a very large part of the world's electricity, diverting poor power for useful purposes.
In which rational universe could anyone simply publish electronic scripts – or simply announce what they mean – and create, uniquely, billions of dollars in value? It does not make sense.
All of this would be a comic joke if innocent people were not at risk. But ordinary people are investing part of the life savings in cryptocurrency. A stock brokerage is encouraging its customers to buy bitcoins for their retirement accounts!
It is up to the SEC and other regulators to protect ordinary investors from misleading and fraudulent schemes. It is time that we gave them the legislative authority to do their work.
William H. Harris Jr. is the founder of Personal Capital Corporation, a digital asset management company that provides personal financial software and investment services, where it currently sits on the board of directors. Harris has founded several companies, including XTec, an IT security company and PassMark Security, a consumer authentication company. Previously, he was director of several public and private companies, including MyVest, RSA Security, Yodlee, GoDaddy, EarthLink, Macromedia, Visual Sciences, NexTag, Answers.com, Avalara, Business.com, LowerMyBills and SuccessFactors. At the beginning of his career, he held various positions with Intuit Inc., a software developer for financial and tax preparation, most recently as CEO. He was also CEO of PayPal Inc., an online payment company. Approach it @BillHarris_PC.
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