Jay Adkisson , CONTRIBUTOR
I cover Wealth Preservation in its legal permutations Opinions expressed by Forbes Contributors are their own.
A company called Bitconnect, which is different than Bitcoin, has recently been made the subject of a class-action lawsuit alleging that it was a Ponzi scheme. The investors say that they collectively lost over $771,000 in their investment in the company and other damages. Bitconnect purportedly had a market capitalization of $2.6 million on January 6, 2018, but was of this writing about three weeks later, it is down to $128 million.
You can read more about the Bitconnect lawsuit here.Next, according to another story you can read here, Tokyo-based Coincheck, Inc., reportedly lost somewhere around a half billion dollars' worth of its customer's blockchain tokens (a form of crytpocurrency) to hackers.
But as big as these numbers are, they pale in comparison to the research paper entitled "Price Manipulation In The Bitcoin Ecosystem" as published in the Journal of Monetary Economics that one person was able to manipulate the price of Bitcoin in 2013 from $150 to $1,000. Meanwhile, one of my readers sent me a link to an article found here which suggests that there is significant price manipulation of Bitcoin going today. (Well, no duh.)
Jay Adkisson
The Bitcoin Bubble
So, in a single week we are presented with reports of significant fraud, theft, and price manipulation in the cryptocurrency markets. This is hardly investment Utopia, and sadly it seems that most of the folks who are having their shirts stolen in crypocurrency are those who can least afford to lose it.
In fact, there is increasing evidence that many of the Bitcoin and other cryptocurrency investors are not just gambling with money they can't afford to lose, but they are gambling with money they don't even have -- by purchasing cryptocurrencies by taking advances on their credit cards.
All of this has made cryptocurrencies horrendously volatile -- their trading charts look the waves of a Bering Sea storm (with the exception of Bitconnect and a few others which looks like that cliff which Wiley E. Coyote always falls from).
These bad things happen with governmental currencies too, but in a much, much lesser degree because those currencies are subject to government regulation and oversight. Take the dollar, for example. The dollar is just a little piece of paper, but it is subject to oversight by the U.S. Treasury, the Federal Reserve, among others. Behind the U.S. Treasury and the Federal Reserve is the U.S. Department of Justice and other law enforcement apparatus, such as the IRS Criminal Investigations branch.
A private individual or group which attempts to significantly manipulate the U.S. dollar would find the full weight of the U.S. government coming after them and fast.The U.S. is hardly unique in this regard. All governments, through their Finance Secretaries or Central Banks or whatever, carefully regulate their currencies.
It is this regulation that causes the currency to be treated with some degree or another of predictability, i.e., currencies move in relation to the markets and to each other, but these moves are typically at much more of a glacial pace -- routine daily swings of 10% or 20% just don't happen (yes, sometimes a currency will crater, such as Iraqi dinars, but not on a daily basis)....
Continue to read page 2 of this article on Forbes here:
https://www.forbes.com/sites/jayadkisson/2018/01/29/bitcoin-cryptocurrency-and-the-government-regula...
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