Bitcoin’s founding ponziteers cash out

Via The Guardian:

There has been a sharp drop in the price of bitcoin and other virtual currencies after South Korean cryptocurrency exchange Coinrail was hacked over the weekend.

A tweet from Coinrail confirming the cyber-attack sent the price of bitcoin tumbling 10% on Sunday to two-month lows.

The world’s best-known cryptocurrency lost $500 (£372) in an hour, dropping to $6,627 on the Luxembourg exchange Bitstamp, while most other digital currencies also recorded large losses.

The latest attack highlights the lack of security and weak regulation of global cryptocurrency markets.

Coinrail later said in a statement on its website that its system was hit by “cyber intrusion” on Sunday, causing a loss for about 30% of the coins traded on the exchange. It did not quantify the value, but the local Yonhap news agency estimated that about 40bn won (£27.8m) worth of virtual coins was stolen.

Coinrail said: “Seventy percent of total coin and token reserves have been confirmed to be safely stored and moved to a cold wallet [not connected to the internet]. Two-thirds of stolen cryptocurrencies were withdrawn or frozen in partnership with related exchanges and coin companies. For the rest, we are looking into it with an investigative agency, related exchanges and coin developers.”

Police have begun an investigation, according to the Korea Herald, which cited a spokesperson as saying: “We secured the access history of Coinrail servers and we are in the process of analysing them.”

The chart ain’t pretty:

Worthless as a unit of exchange.

Worthless as a store of value.

Worthless.

And the founders know it, via the FT:

“These are people that see something moving up and start buying — they jump on the bandwagon,” says Campbell Harvey, a finance professor at Duke University and an investment strategy adviser for Man Group.

“Initially in the crypto space, you had people who really understood the technology. Then there was a typical bandwagon investor situation and you know how it ends — and it did.” But how many have gained — and lost — from the bitcoin bubble? Exclusive data from blockchain research company Chainalysis seen by the FT provides some tantalising answers.

The Chainalysis data quantifies this distinct shift in the make-up of bitcoin owners from longer-term investors — those who held the asset for more than a year — to short-term investors who have traded more recently, by analysing how regularly coins have changed hands.

Last November — before December’s pricing peak — the amount of bitcoin held for investment was roughly three times that held by traders. However, by April 2018, the data show the amount held by investors — about 6m bitcoin — was much closer to the amount held by short-term speculators, with 5.1m bitcoin.

Indeed, Chainalysis estimates that longer-term holders sold at least $30bn worth of bitcoin to new speculators over the December to April period, with half of this movement taking place in December alone.

Straight-up ponzi scheme dynamics.

Comments

      • Doesn’t the graph clearly show not worthless? In fact worth more than at any time before November last year.

      • Not sure how you define worthless.

        For those that got in the iCoin game before the frenzy, it is still well into overpriced (see your chart, look into 2yrs back and earlier)

      • HnH,

        What makes you say the founders of Bitcoin know it’s worthless? The person/persons who founded it have never sold a single bitcoin.

      • H&H, it’s not worthless. It’s a pretty convenient wealth VPN-like conduit to avoid capital controls. All you need is a seller at one end and a buyer at the other. Then you can test the waters with small chunks of your wealth before you flee. Even if you lose a bit, not being arrested at either airport is a big bonus. Sure beats having your fillings forcibly removed.

        The utility of this, at this point is somewhat limited to global backwaters, but it is still a useful function.
        Therefore, it does have some worth above zero.

        What exactly the value of that utility IS, is an entirely different question.

      • Daylight Robbery

        Your chart says Bitcoin is worth approx. $6.5K after this latest crash (it crashes like this nearly every year and then rises to new highs).

      • DarkMatterMEMBER

        They say if you are a hammer, then every problem is a nail.

        Bitcoin being a worthless ponzi is the inevitable view of a financial system so mired in corruption and futility that it can conceive of of nothing other than fraud and deception. Bitcoin became a worthless ponzi scheme because the financial industry looked at it and saw a new tool for theft. That is what they wanted it to be.

        I am happy to be proved wrong. Can anyone put forward something from the world of finance that is actually a positive and progressive innovation? Negative interest rates? QE? Private Banks controlling currency creation? HFT? Corporations run to increase share price? Silicon valley startups run by Wall Street?

        Despite all this, the innovative idea that you can create a immutable record system using networks of machines is somehow the Work of the Devil, and not garlic and sunlight to the financial vampires. You would think that the invention of blockchain would be hailed as a possible way out of the financial mire that we find ourselves in, but no.

        The truth is that the financial system does not want innovation or solution – they want to be left to wallow in their mud of corruption and ill gotten profits.

      • But bwj678, back in February, around $9,000, you were telling us dumb ones that you were buying with your ears pinned back because it was a temporary pullback and was going to rocket again.

      • Have a look at the graph. All the graph craig. It almost certainly will rocket again in the next 12-18 months. And when it does $100,000+ will be the likely high point, followed by an end of the world, the sky is falling crash that signifies the end of bitcoin, back to $30,000-50,000. Rinse and repeat.

        Or it’s going below zero. I know which I think is more likely.

  1. Tax time should be interesting for some. I overheard workmates talking about what to sell to balance the gains againsts the losses. (They went a bit ICO crazy during the frenzy.) At least they are in the black.

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