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article imageOp-Ed: Should Bitcoin be banned? Nobel Prize winner says Yes.

By Paul Wallis     Nov 29, 2017 in Business
Sydney - Bitcoin is either a financial revolution or a paradise for money launderers, depending on your point of view. It’s a hard market to get into, and its reputation as an investment grows murkier by the second.
With Bitcoin trading at $11,000, banning may seem more like sour grapes than a practical market solution. But when even hedge fund managers are talking about “biggest bubble ever”, there are danger signs emerging. The news about Bitcoin is a constant stream of directions, with very little in actual substantive information. It’s not a good look.
Nobel Prize winner Joseph Stiglitz says that Bitcoin doesn’t serve a useful purpose. That’s a damning comment on the market’s pet cryptocurrency with some added fire in terms of facts.
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The fact is that there are only so many Bitcoins available. That’s a major price driver. Bitcoin is exclusionist, and it’s not exactly helpful, when Bitcoin doesn’t really do much actual buying and selling of anything but itself.
In fairness to the creators of Bitcoin, it was originally an experiment. It got out of the lab and in to the market. It’s doubtful anyone could have foreseen this rampage of values, or its effects. Bitcoin has soaked up a LOT of capital. Whether that capital will be realised or destroyed if the bubble bursts is anyone’s guess.
When market greed and hypocrisy hit the fan
There’s also a high level of hypocrisy in the current market mutterings. At the same time Bitcoin is the villain, everyone and his dog is talking about new cryptocurrencies. This isn’t altruism; it’s greed incarnate, the new way to make money out of non-existent assets.
A further caveat on all this sudden wisdom regarding Bitcoin and cryptocurrencies in general is that effectively these currencies create an arbitrary range of values for real currencies. That’s neither safe nor healthy.
Your national currency is worth X in cryptocurrencies. If the cryptocurrencies are priced high enough, your currency is vulnerable to those cryptocurrencies. What if a Bitcoin was worth $100,000? How many billions could be scooped up? What if your market capital was the equivalent of a few thousand Bitcoins?
The question becomes which currency is generating capital, and the cryptocurrencies have a huge advantage in that regard. Capital translates in to assets.
Here’s a Get Rich Quick tale for you:
Burges  a self-styled cryptocurrency trader and former software engineer from London  holds a placar...
Burges, a self-styled cryptocurrency trader and former software engineer from London, holds a placard to protest against Mt. Gox in Tokyo
� Toru Hanai / Reuters, Reuters
You buy a cryptocurrency at say $10 per unit, and you buy 1000 units. The units are suddenly worth $10,000. You’ve done absolutely nothing in terms of generating value except hold the cryptocurrency, but now your $10K worth of cryptocurrency is worth $10 million, based on nothing but the exchange rate for the cryptocurrency.
There’s no protection for cryptocurrency holders. There’s almost nothing to buy with the cryptocurrency, either, except the cryptocurrency. There are no hard assets, and no guarantees. It’s just a currency invented by someone wanting to make a fast buck, no more, no less.
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Better still – Everyone who invests in that cryptocurrency MUST depend on increased values. If the currency goes bust, are there any comebacks for cryptocurrency holders? No, of course not. It’s a classic pyramid scam, without even the pretence of having a pyramid structure, just greed.
Stiglitz may be being polite, but he’s assessed the uses of the cryptocurrencies very accurately. This is a betting game, not a capital game.
One thing for sure – A plague of cryptocurrencies will do some damage to someone, sooner or later, and the damage will be severe.
***While I was writing this thing, Bitcoin dove below $10,000 in a few minutes. Risky enough, would you say?
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of
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