BitCoin Frenzy: Revolution or Fraud?

It seems quite interesting that a currency like BitCoin, supported by a bunch of freaks, geeks, scammers, traders, libertarians, IT programmers and anarchists is becoming popular in traditional forums. BitCoin defenders have lost confidence in state regulation, central banks and monetary policies, a feeling increased after Cyprus banking crisis.

There are previous experiences of electronic currencies, such as those developed by Facebook, Second Life o World of Warcraft, although their use is limited to specific apps or interfaces, and companies are backing them up. However, BitCoin has reached the international arena: some sites like MyBitCoin, Mt Gox, CoinLab o BlockChain allow users to trade and pay in BitCoin directly, anonymously, without any government nor banking supervision whatsoever, to any place worldwide, and change it to the main traditional currencies.
This is possible because BitCoin is a free and independent currency. Their electronic code can be converted to any currency in some platforms. It’s the ideal way to make an international transfer at no cost or to take your money out of Cyprus without the risk of a ‘corralito’. Also, to move capitals obtained by fraud and money laundering.

For some, BitCoin is a bubble, even a pyramidal fraud. For others it’s the future of a free market economy. The truth is, this currency is not as ideal as some say it is. The site MyBitCoin turned out to be a scam. In 2011, a BitCoin user was stolen 500,000 USD when he forgot to turn off his computer at night and a hacker got his access codes without letting any trace. The victim had no bank register to prove it.

Worst case scenario, BitCoin could be a bubble, even a scam like the famous scandal of Afinsa and Forum Filatélico, the two stamp ponzi schemes that imploded in Spain some years ago. 16,000 people lost their savings. Today it seems surprising that people would want to invest their savings in stamps, but they were acting according to the same logic as BitCoin users today.

It seems like a movie although it’s not. There are more than 1,500 USD in BitCoin circulation nowadays and every day the equivalent of 20 million USD trade operations in BitCoins. It is not big compared to forex market which is 200,000 times bigger but we cannot dismiss its importance since BitCoin is an electronic currency which is not backed.

A dangerous speculative game, then, but also an increasingly popular payment method. For example BitPay is a company that provides electronic payment services and B2B transactions with BitCoin. Legit transactions with this currency are an alternative to Pay Pal, Amazon’s FBA and other platforms that use WordPress, WooCommerce, Magento y Virtuemart technology.

In any case, when talking about BitCoin, responsibility and wisdom are a must so small savers won’t feel pushed down a scam cliff. I would not advice anybody to hide a million euros under a tomato plant nor I would ever think risking millions in a code that could be hacked.

About the Author

The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.

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