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The seemingly endless innovations emerging from information technology have created enormous opportunities for all kinds of predatory behavior unchecked by social regulation. Cryptocurrency he is one of the main participants in this contest. The cipher is a Ponzi scheme. This is his IT version of what Bernie Madoff did with his Mutual fund scam in New York City in his 1980s and his 90s.
When people buy virtual “coins,” cryptocurrency platforms receive money, and when enough people continue to buy them, the coins increase in value. In the simple cryptocurrency case, the money is just there, not invested in any income or profit-generating activity, and people sell their coins only when more and more people buy them. You can profit.
The value of the coin rises dramatically if a lot of people are buying and people cashing out while that’s happening create bundles. If new purchases start to decline, eventually the value of cash reserves and coins will drop to the point where they are less than what people cashing out put in. At that point, everyone else will panic and cash out as soon as possible (it’s not that easy to sell crypto quickly) and many coin holders will be hit hard. Eventually the coin will go bankrupt.
Some banks figured all this out (they were a little slow and cautious) and got on board with it. The problem for everyone else in the game is that banks have the IT resources to anticipate when the tide will turn and to get their coin trading systems up and running quickly. . So unless you think you can compete well enough with gamers and Wall Street IT, stay away from crypto (let alone hate stealing from your peers).
A new wrinkle in crypto came with the crypto “exchange.” Cryptocurrency bosses said, “Let’s invest our piles of cash” and now function like mutual funds, but without regulation to protect investors like an investor). A particular problem with exchanges is that once the value of the coin begins to crash, there is a strong incentive to make risky investments with the money of coin holders in order to save the ship. It’s out there, that’s why people are there.
Hard times are tough enough for most working people’s economic prospects. Ciphers are a shiny new gimmick that makes things even worse. It is people who are sucked into scams that promise profits by stealing from people. Don’t you think the digital free market is great? That’s how civilizations die.
It’s both interesting and disappointing that the talking heads haven’t pointed out the true identity of Ponzi-cryptos.Economist Paul Krugman new york times A few months ago (July 12, 2022) I approached the edit page and couldn’t say “Ponzi” out loud.
Robert Park lives in Anderson Township.
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