Thursday, January 16, 2014

BU Finance Professor: Bitcoin Is a Pump and Dump Scheme

Forbes reports (My highlight)
[A]ccording to Boston University Finance Professor Mark Williams the price [of Bitcoin] has really been driven by an influential few. Just 47 people own 29% of all outstanding Bitcoins; 930 own 50%. Another 10,000 folks bring the total owned by the largest coin holders to roughly 75%, leaving a sliver to be split among about 1 million small-change Bitcoiners.

Williams, a former trader and bank examiner for the Federal Reserve, argues that in 2013 the 47 powers coordinated to push prices up. They counted on what economists call Greater Fools. Investors make money when someone is willing to pay a higher price for a security than you did — Greater Fool Theory states that there is always someone willing to pay a higher price. But Williams sees the broader market wising up to Bitcoin’s limitations and taking back control in 2014[...]

“If you hype demand the small incremental amount that is available for sale set the price,” says Williams. “That’s not an efficient market, that’s an inflated market, a market that is misled with false information. I think the market mechanism right now is being interfered with.”

As these facts and questions enter the wider consciousness, as they have begun to, Williams feels smaller Bitcoin investors will pull out. “When these million people stop buying at these high prices, that’s when the house of cards will start falling pricewise.”
Note: I can't find a quote in the Forbes piece, but the headline says Williams expects the price of bitcoins to drop to $10.00.

12 comments:

  1. Now, we're getting somewhere. Hope this takes the wind out of this trial (or hot air) balloon.
    Meanwhile, in other news, the Khobragade fake-slavery case, the Indian gvt has unearthed multi-crore institutionalized tax and visa fraud at the prestigious American school in Delhi.....possibly encouraged by the very same US state dept. which is behind the NGO campaigns against low wages for servants and corruption in India.

    http://www.firstpost.com/india/american-embassy-school-in-eye-of-multi-crore-tax-scam-1343915.html

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  2. This exactly what I would expect a former trader and bank examiner for the Federal Reserve to say.

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    1. Yeah, he's just bitter that he didn't get in early and start laying off his Bitcoin at its high. Or maybe he got in early but sold too soon. Or maybe he has a short position that he wants to liquidate more profitably.

      Anyhow, my own LONG TERM prediction for the price of Bitcoin is <$1, like the final price of a penny stock of a small firm with a little revenue, murky origins, and vague assurances that its shares will remain liquid and eagerly sought more than 100 years from now. So we could call it Bitstock.

      "Bitstock: It's your equity in the coin of The Block Chain, or maybe, uh, sectors of an electronic storage device that you already owned before you bought Bitstock."

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    2. So, basically you just described a pump and dump scheme. Shitcoins are now being called Shitstock?! Now I've heard everything. If they reported that shitcoins were a ponzi scheme and presented proof, then the price of shitcoins went to zero DOLLARS (which it most certainly could compared to other GREATER alternatives such as gold and silver which will NEVER be zero) you, especially Honey Badger, would still somehow defend shitcoins. They are just that...worthless fiat shit. So what if they're not government controlled (well, not right now anyway). They're still volatile crap. Do your self a favor and buy gold and silver as a real hedge against inflation which will be coming soon to the U.S.S.A.

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  3. Wenzel's citing a guy who believes Elizabeth Warren and the Dodd-Frank act are wonderful. Next up, Wenzel will be citing Krugman to make his arguments against Bitcoin for him.

    http://management.bu.edu/blog/2012/11/19/dodd-frank-consumers-win-big-mark-williams-writes-in-boston-herald/

    The price of bitcoin doesn't matter. As long as there are buyers and sellers, the system allows the transfer of wealth to take place. Bitcoins could drop down to a penny, but the system is going to keep on chugging along just fine. Just like any real currency, the only way the currency will die is if the cryptography is compromised allowing for the "counterfeiting" of bitcoins to take place. Barring that event, which is far less likely than the dollar going to zero, the bitcoin monetary system will continuing gaining market share until it comes to dominate the world. It's simply the best currency ever created in the history of man.

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    1. What if the electricity goes out?

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    2. @ Anonymous January 16, 2014 at 3:20 PM

      Use your gold and silver until it comes back on. Or, trade with your Casascious Coins. I suspect you will have much bigger problems though if the electricity stays out for an extended period of time.

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    3. Not if I have cash, gold, or silver. No problems at all. Shitcoins won't get me gas, food, water, or anything. Cash, gold, and silver will. Therefore cash, gold, silverare greater than shitcoins. And EVERYONE knows what they compared to kanyecoins or shitcoins or whatever Atari money you're trying to peddle.

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    4. nobody wants your gold or silver fools.... when was the last time you could pay for a pizza with gold or silver? well I can buy a pizza with bitcoin. I can buy tons of stuff on craigslist, ebay, overstock.com, tigerdirect.com - all with bitcoin. In Europe they now have bitcoin ATM's so you can pay for gas, food, water and anything with bitcoin. you guys are all uneducated fools that know nothing about what you are blabbing about... Go spend $20,000 on some bitcoin mining rigs, learn what it really is, how it REALLY works and shut up... oh and then go get yourself some bitcoin the next time some chinese news site puts out crap, BS rumors, which drives the price down... this has already happened 3 times with a rumor from a chinese news site about the PROC banning bitcoin.... everytime, the price tumbles... then the chinese and anyone else smart, buys up more bitcoin.... simply... "It's better to ride the wave, than eat the foam"

      Me and all my bitcoin mining buddies are getting stinking rich off this because we don't fight it, we acknowledge it, get it fast... and if we need to get out, we get out... simple as that. There are already bitcoin millionaires from the $6 - $1000+ push - then the price stabalizes at $600, even at MTGOX collapse, then it drops on false fake chinese news reports... so anyone 'playing the game' can buy up more.... cheap...

      as Rupert Murdoch said "In the new world, it will be the fast beating the slow, not the big beating the small"

      from me to you... hurry up!!!! :)

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  4. "BU Finance Professor: Bitcoin Is a Pump and Dump Scheme"

    Newsflash! So are the dollar, Treasuries, Social Security, Obamacare, Wall Street, central banks, the Fed, and the U. S. Government. HELLOOOO???

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    1. And MtGox took and all and DID A RUNNER. LOL. Now back to daytrading your bitcoin sonny.

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  5. Mtgox did a runner... lol... how you like me now?

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