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Is it time to reconsider cryptocurrencies like bitcoin?

Bitcoin will turn 10 next month, so it's time to check with the bitcoin bank, where the cryptocurrency craze looks just as crazy a year ago.

A bitcoin is trading at $ 6,425, down from $ 19,650 on December 16, 2017. Other popular cryptocurrencies have declined even further. We are still waiting for last year's $ 50,000 bitcoin forecasts to come true.

If they do, computer-driven operations will almost certainly have manipulated the market, according to a new report by the Wall Street Journal. And this perfectly legal game is probably the only thing that keeps bitcoins afloat, along with money recyclers.

Bitcoin remains a largely unregulated imaginary currency that trades strings of code using blockchain technology. The blockchain checks the amount of available bitcoins, records each transaction and shares a block of code as proof of ownership.

The blockchain is shared on all the computers participating in the market while guaranteeing anonymity. There is no central bank or central regulatory authority because bitcoin is transnational. This statelessness is what attracts libertarians, criminals and speculators in bitcoins, the most famous of cryptocurrencies.

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This time last year, bitcoins have captured global imagination. People all over the world have created digital wallets and bought bitcoins, bringing the price from $ 909 in early 2017 to almost $ 20,000 at the end.

"The strings of computer code will never become a real currency capable of maintaining value over time," I wrote at the time. "And just as gravity holds back Earth, the economy will bring the perceived value of bitcoin to collapse."

The accident started a few weeks later and prices have struggled to recover.

Currencies require some authority to guarantee their value. Since the end of the gold standard, governments and central banks have retained value through a responsible fiscal policy and limits on the amount of money in circulation.

Venezuelan President Nicolas Maduro is providing a masterclass on how to destroy a currency through the government that spends and circulates too much. The rate of inflation in Venezuela is expected to reach 1,000,000 percent, the International Monetary Fund said.

Cryptocurrencies use blockchain to predictably release new digital currencies, but there is no authority to increase or reduce the offer to limit peaks, depressions and manipulations. And some traders are taking advantage of creating sophisticated high-speed trading programs to make "pump and dump", "spoof" and "ping-pong" to trick people into buying or selling bitcoins, according to the Journal.

Those trading tactics are illegal in most trades, but not so with bitcoins. This is why the Securities and Exchange Commission blocked nine attempts to create funds based on cryptocurrencies.

To make the software work, however, an investor must have a large amount of bitcoins. The so-called whales use these tools to protect their wealth, putting small investors at a disadvantage.

The Texas State Securities Board was the first state regulator to act against cryptocurrency fraud and blocked 11 profit-rich schemes.

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"It is important to note that the State Securities Board is not regulating the cryptocurrencies themselves, but only the offers that claim to use virtual currencies in an investment program," warns the commission. The scam artists create programs of this type for people who want great returns but do not want the hassle or the risk of possessing a cryptocurrency.

The closure of a fraudulent fund, however, can have knock-on effects.

"Shortly after the security commissioner entered an emergency order against BitConnect, the value of the company's cryptocurrency, called BitConnect Coin, fell from $ 2.6 billion to near-zero," said the board of directors. .

This was a loss of $ 2.6 billion for investors, or potentially, money launderers. Cryptocurrencies offer the perfect opportunity for criminals to buy a digital currency on a national exchange and sell it on another. A global coalition of order forces is trying to develop a way to prosecute money launderers, but it will be tough.

Maduro has announced a cryptocurrency to finance his dictatorship called petro, which will go on sale on November 5th. But remember how well he managed the bolivar.

Supporters of the most balanced cryptocurrency recognize the need for more government regulation to bring order and respectability to cryptocurrency trading. But for others, removing anonymity and free-wheeling transactions removes the whole reason for having cryptocurrencies.

One day, someone will launch a well-regulated cryptocurrency. But lest anyone take seriously the claims that bitcoins and cryptocurrencies are going to take off again, ask yourself how you would feel if you bought bitcoins for $ 19,000. Because a lot of people have done, and are sorry now.

Chris Tomlinson writes comments on economics and business.

chris.tomlinson@chron.com

twitter.com/cltomlinson

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