Warren Buffett, Jamie Dimon, and me. We all dislike cryptocurrency. The CEOs of Berkshire Hathaway Inc. (NYSE:BRK.A) and of JPMorgan Chase & Co. (NYSE:JPM) are regularly asked about the prospect of a working Bitcoin investment, and they just as regularly pan it.
It’s easy for Buffett and Dimon to pan it, Bitcoin bulls reply. They’re rich already. I’m not, but I’m nobody, they will reply. Even last month’s news that the U.S. Justice Department has launched a criminal probe into cryptocurrency price manipulation seems easily dismissed.
The Media and the Message
Cryptocurrency emerged at a time when conventional media was collapsing for lack of a business model. The media following cryptocurrency is thus mainly controlled by cryptocurrency traders.
Coindesk, for instance, one of the largest sources for news in the Bitcoin investment space, is a subsidiary of Digital Currency Group, the cryptocurrency venture capital house.
NewsBTC CEO Samuel Rae, one of the oldest news houses in the space, admitted recently that crypto news media is often subjected to “a little more outside influence than what’s comfortable to say.”
That’s an understatement. Bitcoin, all cryptocurrencies, are a game of liar’s poker. There is no effective regulation, no guarantee of legitimacy. No one really knows anything.
The Bitcoin investment market on June 8 was worth about $129 billion, less than the market cap of McDonald’s Corporation (NYSE:MCD), and just 1,000 people controlled 40% of the crypto market.
Price manipulation schemes that are illegal in the stock market are perfectly legal in crypto. The trustee for Mt. Gox, an exchange that failed in 2014, is still trying to liquidate its holdings, and may still have held over 137,000 Bitcoinlast month.
Add malware which stole over $1.1 billion of cryptocurrency assets just this year, regular failures of Bitcoin exchanges, often due to hacking, plus a complete lack of transparency, and you have a market ripe for manipulation.
Beware Making Any Bitcoin Investment
Here’s an example of what can happen.
The Independent in the UK ran a story June 8 quoting “blockchain expert” David Hanson saying Bitcoin prices will double as “big institutions enter the crypto space to gain first-mover advantage.”
The story also quoted “experts” claiming prices will hit anywhere from $35,000 to $250,000 per coin.
They’re not experts. Hanson is a roboticist who runs a video game platform called Ultra. The other “experts” are also big holders, players in, or advocates for cryptocoins, like venture capitalist Tim Draper, who believes Bitcoin will hit $250,000 by 2022.
Belief is not expertise. Holding cryptocurrency is not the same as knowing where the price will go. Yet when reporters look to do a story on cryptocurrency, these players are the “experts” they’re steered toward.
The Bottom Line
Nobody knows anything. I don’t know where Bitcoin prices are going to go. No one does.
I do know that, as prices for Bitcoin have fallen from $17,000 in January to $7,600 more recently, Google searches for Bitcoin have fallen 75%.
I do know that Chainalysis, which is helping the Internal Revenue Service track down cryptocurrency tax cheats, has recently seen a move from long-term holders to short-term speculators.
I also know that so-called “tumbler services” like Bestmixer are working hard to frustrate Chainalysis’ efforts to track the market.
In short, the games continue, the cat and mouse between crooks and Bitcoin bulls continues, and the market remains largely unregulated. If you think you can outsmart these people go ahead. A fool and his money were lucky to get together in the first place.
Dana Blankenhorn is a financial and technology journalist. He is the author of a mystery novella involving Bitcoin, The Reluctant Detective Saves the World, available now at the Amazon Kindle store. Write him at firstname.lastname@example.org or follow him on Twitter at @danablankenhorn. As of this writing he owned no shares in companies mentioned in this story, and no cryptocurrency. To follow the value of cryptocurrencies bookmark https://coinmarketcap.com/