Page 36 - English Tehelka Issue 1&2

column technology

Bitcoin: A bubble waiting to • money woes It’s only a matter of time that
people start seeing the trickery behind making
bitcoin popular currency
burst likes Ponzi schemes

scheme eventually fails because of lack
of public interest. The sufferers would
be gullible people who are investing
News & Cryptocurrencies are just another way of luring people to invest in it too late. Many of us are tempted
big money to become millionaires overnight by creating a hype.
views However, there is no legal backing for such digital money to make a quick buck by investing in
cryptocurrencies, particularly bitcoins.
Bharat hiteshi These promise phenomenal returns.
One bitcoin, which was available for
xactly in Bollywood style note recently concluded that bitcoin’s USD 0.09 in 2010 had surged to almost
Hiteshi is an when cops reach at the end acceptance “is virtually zero”. What then USD 20,000 in just seven years. It, how-
independent journalist- of a brawl,at last the govern- explains Bitcoin’s huge and phenom- ever, had a rollercoaster ride, where for
turned-author and a ment has woken up to press enal price rise? How can a top film star every winner there were several losers.
political commentator. the alarm bell against bitcoins reportedly raise his investment of a few The finance ministry has now admit-
The views expressed E or cryptocurrency. Coun- lakhs into crores of rupees? The lure of ted that “there is a real and heightened
are his own tries like South Korea, Bolivia, Ecuador, extraordinary gains and greed associated risk of investment bubble” and “sudden
Kyrgyzstan and Bangladesh have already with it, of profits in very short periods of and prolonged crash” would expose
banned cryptocurrencies. J.P.Morgan, the time in the case of bitcoin, has attracted retail consumers who would lose their
financial wizard, calls Bitcoin a “fraud” people from all walks of life including hard-earned money.
and the largest Ponzi scheme ever in some celebrities into this shady currency. The ministry is also apprehensive
humanity. The Finance Ministry has now Indeed, this is typical of bubbles that are and garnered huge sums of money. Gullible people that the virtual currency could be used
come out with an action plan against driven by emotion rather than value Why gullible people are fascinated for subversive activities such as terror-
bitcoin and cryptocurrencies. as has been happening in case of Ponzi by bitcoins is that for example just who will invest funding, drug-trafficking or money-
For our readers, I would like to explain schemes or ‘chit fund scams’. Then there one lakh rupees invested in bitcoin in in bitcoins now laundering. The RBI has been issuing
that the claim that bitcoin holds huge is an inherent danger because anyone 2010 would be worth a few hundred similar cautionary notes since 2013.
fundamental value as a medium of who has access to a bitcoin password crore rupees today. That is the kind when the price is Despite cautions from the guardians of
exchange is yet to be seen. Bitcoin was in- has the authority to spend the bitcoins it of extraordinary returns the bitcoin skyrocketing the economy, many bitcoin exchanges
vented by an unknown person or group unlocks; loss of the password means loss cryptocurrency has given to investors are working with impunity in the coun-
to be a digital currency. It allows money of all of the associated bitcoins, with no as its price has witnessed a meteoric will end up losing try. Many rich celebrities and powerful
to be transferred directly between indi- recourse. Second, linear growth in the rise, from just a few cents in 2010 to their hard earned people are associated with this rage.
viduals using cryptography. Bitcoins are chain of blocks that make up bitcoin is hit a lifetime high of over USD 11,000 The finance ministry will be failing in
reportedly created at pre-determined resulting in exponential growth in the last week. In 2017 alone, bitcoin price money by getting its institutional duty if it did not move
and gradually decreasing rates, with a computation necessary to process and has increased by over 1000 per cent. In into the trap proactively to protect gullible investors
total limit of 21 million issuable coins. verify transactions. fact, the time it took for the currency from a Ponzi-like scheme. No virtual
Buyers sit on their coins while they wait Now our finance ministry has publicly to reach $11,000 after breaching the currency, not even the popular bitcoin,
for their price to rise further. What is accepted that there is a “phenomenal in- $10,000 mark was a single day. True to has been accepted as legal tender by
wrong with bitcoin is that its supply is crease” in the prices of virtual currencies, its nature, however, soon after hitting or even real currency. any country. It is time for the Finance
constrained and increasingly falling including bitcoins, which are like “Ponzi $11,000, bitcoin witnessed a sharp drop The stocks or shares have value be- Ministry to act fast. Long ago a similar
short of demand. As such instead of func- schemes”. Ponzi schemes drive their of 20 per cent before recovering some cause they belong to a company which bubble burst in West and people lost
tioning as a currency, bitcoin remains a name from Charles Ponzi, the notorious of its losses to close the day almost flat. may go into red or earn huge profits. everything, leaving thousands of inves-
speculative empty asset. financial trickster who duped inves- The sudden rise and fall in bitcoin However, in comparison, the bitcoin is tors in despair about their futures. His-
The so-called block chain technol- tors of about USD 20 million way back value depends on demand and supply. a scheme having no intrinsic value. The tory is repeating itself now with bitcoin.
ogy is showing increasing interest in it in the 1920s. The US regulator defines a If there are more investors, it would price goes up phenomenally when peo- The price of bitcoin may yet double
as many people are out to make a quick Ponzi scheme as an “investment fraud” rise in view of more funds pumped into ple are buying it and when they stop or even quadruple because its price is
buck. Bitcoin or any other cryptocur- that pays existing investors with funds the system. Little doubt that other cryp- purchasing or investing, it goes doing based on pure speculation and hype
rency may have intrinsic value because collected from new investors. Eventually, tocurrencies like Ethereum witnessed and its value is nothing more than a big but the bubble is waiting to burst any
of the kind of money early birds are the scheme caves in when it fails to lure equally impressive gains and falls. Like zero. In view of this, bitcoin is the most time. It is time for the gullible public to
making out of it. However, it is nowhere new investors or a large number of exist- the stock markets, this sudden rise and unreliable and is not going to become be aware of the trap that they are get-
close to widespread use as a medium that ing investors decide to cash out. Recently fall promotes speculation and people a legal currency. The truth hurts and ting into and for the Finance Ministry
helps in the exchange of goods and ser- some top notch non-banking finance wanting quick returns rush to in- the bitter truth or the stark reality hurts to act swiftly and sternly!
vices like the ethical currency which is a companies (NBFCs) of our country gained vest. Actually, we can’t compare bitcoin most. The current bubble may pop
legal tender. A Morgan Stanley research notoriety by launching Ponzi schemes which has no real world usage to stocks anytime for the same reason a Ponzi letters@tehelka.com

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36-37 Column Hiteshi.indd 2-3 12/01/18 4:08 PM