Crypto-Currency Part 3 — Pros, Cons, Disasters

Knowing a lot more before anyone invests in a deal or stock is absolutely essential. It is after all an attempt to invest in your future using funds you worked hard to acquire. So wise and responsible consideration is the best course of action. Even the most savvy can be fooled though. We have seen over and over what appeared to be great deals end up going down the drain taking investors with them. Even the government helping grow a “green” industry or getting bids for military housing takes a beating but then it doesn’t ever seem to be wise or savvy.

Go online and research if interested in purchasing coins.  Here are two of hundreds of sites: Reasons why Anthony Matthews likes trading bitcoins. or for latest news try Crypto Currency Buzz.

Stocks, bonds and such are trading daily without any physical transfer of paper or meeting actual people in person. They are listed on an exchange and all transactions are generally traceable. If something goes wrong then there is recourse and people available to find.

Printed monies definitely fluctuate according to financial markets, they have not (as yet) reached total worthlessness if still in active circulation. They are acknowledged by countries and have something of value backing them, usually gold or oil.  Now countries and businesses  are moving to credit/debit cards rather than paper money especially with the huge internet market needing faster payment methods.

In the case of crypto-currency, there is zero ability to trace either the beginning or end users as I mentioned before.  Certainly no cloud or other singular housing available to find transactions so that an auditor can get information. The only way would be to have the keys, either one or both. But many of the activities provide only a one-time key during transaction that is gone once completed.

Governments, financial reporting groups, law enforcement and others have had a difficult time, first defining then getting a handle on this new idea for currency. In 2009, China decided it was fundamentally not currency, but an investment target, so they decided to ban bitcoins there for real world purchases. The Federal Counsel of Switzerland, PC World and Huffington Post considered crypto-currency to be legitimate. At about the same time, a US Senate committee hearing in 2014 decided virtual currency was a legitimate financial service. The US Treasury classified these coins to a decentralized virtual currency. Bloomberg added its stamp of approval to legitimacy when it added Kraken Exchange and Coinbase on its subscription financial data terminals.

Yet, others mostly journalists and economists, considered this to be an elaborate Ponzi or Pyramid scheme. In April of 2014, John Quiggin, an Australian economist, commented bitcoins will attain their true value of zero sooner or later, but is impossible to say when. While Alan Greenspan labeled these coins as a “speculative bubble.” Perhaps because in 2013 alone 45% of exchanges failed and took clients bitcoins.

Between 2011 and 2012, SEC took Bitcoin Savings & Trust and Trendon Shavers known online as “Pirate 40” to court. It was said he had taken 700,000 bitcoins from investors in a Ponzi Scheme by promising up to 7% return on investment. SEC noted he used later investors to pay the earlier ones while taking a hefty cut for himself of about 150,000 coins ($3 million) and funding his living expenses with the money. (In this year’s trading prices, the coins would be worth about $25 million.)

Judge Mazzant in federal district court Case 4:13-CV-416 concluded that crypto-currency (regarding bitcoins in particular) met the definition of investment contracts, and as such were securities according to the Securities Act of 1933. He did not consider whether they were notes. He also considered bitcoin as a form of money since it was used in normal money transactions. SEC used his ruling to go after securities fraud.

This market has been a made-to-order breeding ground for theft from hackers and people in illegitimate trades like money laundering,theft, and drugs. The system since it began to take off has been riddled with incidents mostly due to security coding and anonymity.

What better way could the black market have to move product and be paid, untraceable and secretive. Silk Road’s owner Ross Albright and others in Operation Onymous were arrested back in 2011 and sentenced in February this year for black-market sales of drugs. At about the same time DOJ and IRS seized Liberty Reserve (Costa Rica) assets for money laundering and several other charges.

One of the largest exchanges, Mt Gox, suspended operations for a time after they were robbed of nearly $473 million in coins or about 7% of all bitcoins in existence at that time. BitPay, a payment service provider had to shut down for a while having lost 15,000 coins, then after security upgrades reopened January this year.

So my closing statement?? Something described as money with no physical substance, backed by no valued tender is floating across the internet without being traceable or owned by any country and will devalue to zero. Enter speculators, risk takers, people looking for ways to escape detection. Yes, this really sounds like a place I would be excited to dive into to earn loads of retirement money. Maybe years down the road it will work but I doubt it. Although security nightmares would keep computer guys well employed writing programs and courts filled with angry investors for years until it is worked out.

I have an online Mother Hubbard shoe house I am going to rent spare rooms for those who have bitcoins to spend! Just let me know so I can get you the key!

–Uriel–

About Uriel

Retired educator and constitutionalist
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6 Responses to Crypto-Currency Part 3 — Pros, Cons, Disasters

  1. Kathy says:

    I don’t think this will last, do you? Especially with so many Boomers in the US who still want to deal with cash. Some in the younger generation might go for it, but most will not. Without their debit card, my kids couldn’t spend a dime. They never have cash and do everything online. I’m just not that trusting.

    • Uriel says:

      Kathy. I honestly don’t know. There is a new group (hint hint) backed by mega bucks so its rumored that will top all of these called Zerocoins. If rumor is true then its a safe bet this was where it was all headed to begin with.

      • Uriel says:

        I find it interesting the timing suggested for that ones rollout. October 12, 2015. Shades of disaster on that timing. Check Jewish and Islamic calendars

    • upaces88 says:

      All of this is so confusing to me. First it was “Bitcoins.” Now something else.
      Even if I go to my bank and buy Silver Coins…how do we spend that at the grocery store.

      • Uriel says:

        I agree upace. Times get more complicated every day. I am not a really trusting soul. Paying bills at the location, talking to a live person online, and counting inhand money is more my speed. It seems the more complex we become, the more I find trust, responsibility, and morals flyaway. Impersonal doesnt allow for interaction. But, what do I know I grew up in the 50’s and 60’s when the world had more time to reflect and learn Before they opened their mouths.

  2. Hardnox says:

    Interesting…

    The whole bitcoin thing always had me thinking it was as reliable as Carbon Credits.