Twice Bashful: Five Scams and Bubbles That Make Regulators Skeptical of Bitcoin
Bitcoin may indeed be something truly fresh te the world of economics and finance. However, memories of past “financial innovation” schemes help to tarnish the pic of Bitcoin. And while no one is calling the leading crypto currency an outright scam anymore, governments are still wary and attempting to protect users from big mistakes ter individual finance.
Beyond the talk of “tulip mania”, there are more latest schemes that work to increase Bitcoin skepticism.
Russian Pyramids and Bitcoin Investments
Eastern Europe and Russia eyed their share of pyramid schemes, also known spil Ponzi schemes. Investment vehicles promising effortless comes back, but relying on the inflow of fresh investors to get through, found fertile ground ter post-communism countries still reeling from economic instability. Because Bitcoin’s price also increases with newcomers, it has bot compared to a financial pyramid.
Sergei Shvetsov, the very first deputy governor of Russia&rsquo,s central bankgebouw, said he is worried about investor protection. “Wij see Bitcoin step by step turning into an asset acquired for the purpose of obtaining a high yield ter a brief period of time, meaning it has signs of a financial pyramid,” said Shvetsov.
Just like pyramid schemes, Bitcoin has invited many to inject their life’s savings with desires of making it big.
And this has made Russia skeptical, banning cryptocurrencies for years to prevent another deep-throat to consumer finance, just spil the country wasgoed injecting a period of economic recovery and some excess investment money.
Hong Kong Bogus Investment Opportunities
Hong Kong spotted a boom of unlicensed investments, thriving te 2015, only years before the arrival of Bitcoin exchanges, crypto companies and ICOs. Since then, scams from unlicensed investors have only enlargened. What unlicensed investment scams have te common with Bitcoin is a method using noisy publicity, social media presence and promising high comebacks.
No wonder Hong Kong banks may be skeptical and refusing to service Bitcoin companies, having encountered an earlier veelzijdig of scammers. For now, the losses amount to $Two.82 million- a rather low sum, te the range of individual finance. But Bitcoin has arrived on the toneel just at the time when the Hong Kong financial authority wasgoed already growing tired of warning about get-rich-quick schemes.
Pink Sheet Stocks and Marijuana Companies
Pink Sheet companies are very agile- they are known for switching tickers and showcasing up with a fresh batch of shares to lure fresh buyers for a one-off pump and dump scheme. At several points te their history, some altcoins have resembled that treatment. Strangely, Bitcoin has not done anything like that, but ter the years around 2011-2014, a lotsbestemming of fresh coins demonstrated up with a pre-mine, each one promising to displace Bitcoin.
Around 2014, running a marijuana business wasgoed all the rage and marijuana company Growlife wasgoed flying high, just around the time PandaCoin wasgoed also peaking. Both crashed, Growlife has bot defunct since, but PandaCoin resumes.
Yet the arrival of companies like Medical Marijuana,Inc. (MJNA) wasgoed an event similar to the boom of ICOs, where “blockchain” remained the keyword, instead of “medical marijuana”. Around 2014, the US Securities and Exchange Commission ultimately cracked down on paid pumps, and wasgoed primed for the ascent of ICOs te late 2016 and 2017.
China: Overheating Economy and Unlicensed Microloans
China’s freshly found wealth and liquidity are not without their troubles. Micro loans boomed ter China, distorting the market for rente rates with the entrance of many unlicensed operators. But Chinese micro lending had a predatory side, targeting users with limited funds.
The scheme is not unique to China, but has found fertile ground there and grown. No wonder that Chinese regulators are wary of schemes that lead to potential extortion and losses.
The Credit Default Interchanges and Risky Mortgages
The world economy wasgoed just unraveling from one of the previous bubbles, reeling te shameful freefall spil a set of toxic instruments, called “credit default interchanges” had flooded handelsbank balance sheets. No one knows how much value would have bot wiped out if the central banks had not intervened to provide liquidity and confidence to banks and spil the years progressed, to dilute the effect of the toxic financial innovation.
Almost a decade after, just spil the central banks were preparing to breathe effortless once again, Bitcoin came ter with a retinue of altcoins, tokens, projects and a rechtsvordering to the next wave of financial innovation. No wonder the European Central Handelsbank and other regulators are bristling once again, after facing another round of cleaning up the aftermath of a bubble and the wipeout of value and economic confidence.
What turmoil can be caused by Bitcoin and altcoins is anyone’s guess. At this point, the total market cap of the cryptocurrency market has enlargened to inbetween $200 and $300 billion. To compare, Enron had a peak market cap of $60 billion and the fallout affected many.
A fallout ter the world of cryptocurrencies would be like the crash and burn of a very large corporation- with the added stress of abandoning high hopes. The other screenplay is that cryptocurrencies may turn out to repair some of the flaws of a system where financing always creates bubbles spil the default story.