How Bitcoin is a Scam

how bitcoin is a scam

When I published that article, that was over a year ago, Bitcoin was rocking. However, there have been several disturbing and alarming facts that actually forced me to write this How Bitcoin is a Scam article. Unfortunately, it looks like all this is actually a fact and the huge Bitcoin price drop is proof of what the markets think about Bitcoin.

Bitcoin is on a roll right now. Its price has been breaking one record after the other. However, there is a question. Is Bitcoin a Scam and How Bitcoin is a Scam? Will bitcoin’s price plummet and when this is going to happen?

In this article, my aim is to answer all these questions by telling you the truth about bitcoin, and frankly, I do not care whether you like it or not, I feel it is my duty to let my audience know what I’ve discovered during my research.

I’ve always been sympathetic towards bitcoin and other altcoins. In fact, I think there must be something that could stop governments and central banks from manipulating monetary policy. Bitcoin seemed that it could actually take that role and become the alternative currency-asset, that protects the ordinary folk from government and central bank reckless monetary policies.

After the latest bitcoin price surge, I decided to investigate bitcoin and find out whether bitcoin is actually worth all the hype and expectations or not. Here is what I’ve discovered.

Bitcoin has Old Outdated Blockchain Technology

Bitcoin is the oldest cryptocurrency. At the time it was developed the technology behind it was breathtaking. It is a first-generation technology cryptocurrency.

how bitcoin is a scam

Nonetheless, bitcoin’s first-generation technology compared to other crypto’s second and third-generation altcoin technology makes bitcoin stone-age crypto. Bitcoin can only handle transactions from one crypto wallet to another and that’s it. Bitcoin needs to innovate again otherwise it will be taken over by third-generation advanced altcoins.

Third-generation altcoins have addressed the famous Trilemma blockchain problem. The concept behind it is to improve scalability without suffering security and decentralization.

Bitcoin’s Huge Transaction Costs

The transaction costs behind bitcoin are enormous. At the moment the fee for a bitcoin transaction is $24,26. The result of this is that bitcoin is totally unsuited for everyday retail transactions. In addition, the proof of work technology does not allow more than five transactions per second whereas the visa network allows more than 24000 transactions per second.

Regardless of the huge transaction costs bitcoin is not a scalable means of payment for goods and services. It is mainly used for speculation and buying other cryptocurrencies. It is a self-service system.

Some argue that bitcoin is actually suited for the transfer of large amounts of money from one country to another. These types of transactions are under constant surveillance from authorities to stop tax evaders, human traffickers, criminals, and drug dealers from transferring large sums of money from one country to another.

There is a crackdown on these types of transactions and there is going to be a similar crackdown on international cryptocurrency transactions.

Bitcoin and Other Cryptocurrencies Are Not Assets

Investment assets like stocks, bonds, real estate, and so on, will give you income, dividends, rent, interest, and so on. Some of them will also provide a use. For example, commercial real estate will give you housing services.

how bitcoin is a scam
Commercial Real Estate

Gold and other precious metals, do not give you an income but they have a use either in the industry, jewelry, monetary use, and store of value.

Bitcoin has no use, no income, and no utility. It is a pure speculative self-fulfilling bubble on price appreciation. They call it an asset but it does not have any of the features assets have. Additionally, it is not a currency because it cannot be used as currency. It is a self-fulfilling bubble with zero intrinsic value.

Bitcoin’s Unsustainable Energy Consumption

In order for the bitcoin network to deal with the everyday transactions and carry on the mining process, the amount of energy it consumes is equivalent to the energy Argentina consumes.

The whole mining process where a number of miners compete against each other with one of them winning the task of verifying the transaction which is an inefficient process that gets put in a ledger to be shared with the bitcoin computer network. This is an inefficient way to verify transactions.

how bitcoin is a scam

In a normal financial system, there is a small number of individuals or institutions (banks, and so on) whose job is to validate, and verify transactions and make sure there is no double-spending.

If we take into account the huge energy consumption, and the inefficient transaction-mining process and add the carbon tax to it then, bitcoin’s value should be well below zero.

Bitcoin Price Manipulation

Unfortunately, there has been an orchestrated Bitcoin price manipulation operation. There have been allegations of pump and dump groups on Telegram who are pumping and dumping the price of it.

We are also aware of the tether issuance which has been bringing a billion dollars into Bitcoin almost every single day money coming out of nowhere. Sadly, it looks like Tether has been used to buy Bitcoin, and of course, all this is not backed by anything.

How Bitcoin is a Scam

Furthermore, there is evidence for spoof trading, wash trading, and front-running trading or tailgating. Right now there are several investigations undergoing on whether there has been price manipulation.

The Abundance of Money and the Effect on Bitcoin

With negative interest rates and non-stop money-printing, there has been an abundance of money. The reality is that the financial system has been flooded with money. All that money went to the stock market and cryptocurrencies. Yes, the never-ending money-printing by the Fed helped the creation of the Bitcoin bubble. Nonetheless, right now there is a shortage of money affecting bitcoin.

how bitcoin is a scam

Bitcoin is not a Decentralized Currency

This is another of the bitcoin myths. The reality is that 70% of Bitcoin mining is done by six mining firms based in Russia, Belarus, and China. This is an oligopoly. Russia, Belarus, and China are three countries where there is no rule of law and they are all strategic rivals to the United States.

This is not decentralization. True decentralization should apply to all Bitcoin operations. Decentralization in mining, in exchanges, in wealth, and in development. The vast majority of Bitcoin wealth is concentrated on a very small number of people and companies. I call it the bitcoin oligarchy.

Sadly Bitcoin has become a highly centralized system with a very small number of people owning it, controlling it, and manipulating it. All that goes on in countries where there is no rule of law.

What Bitcoin is, or What Bitcoin is Not

Bitcoin is not a currency, it is not a unit of account, it is not a scalable means of payment, it is not seen as a numeral, it is not a stable store of value and it is certainly not a hedge against risk. Some people still argue bitcoin is a hedge against risk. We did not see that during February and March last year when we had the collapse of global equity by 30% and 40%. At that time bitcoin went down 50% and other cryptocurrencies 60%.

The Ripple XRP Cryptocurrency Scam

A month ago Ripple, its chairman, and CEO were all sued by the US Securities and Exchange Commission. Allegedly they illegally marketed and sold securities worth $1,3 billion. According to SEC Ripple raised capital by selling XRP in an unregistered securities offering. In addition, Coinbase was also sued because knowingly sold XRP as unregistered security and on top of that gained commissions on these sales.

how bitcoin is a scam

The Bitcoin Bubble

The bitcoin bubble is set to explode and many assets will suffer a big blow. There is going to be a bloodbath. This is because Bitcoin’s market capitalization is over $1,4 billion dollars. Back in 2018 during bitcoin’s previous collapse, from $20,000 to $3,000 bitcoin’s market capitalization was only at around $200 million.

Final Words

I’ve always been sympathetic to Bitcoin. I thought it could become an alternative to fiat currency and change global payments forever. In the past bitcoin was the holy grail of cryptocurrencies, the number one. If Bitcoin collapses and if the ongoing investigations find price manipulation, and it looks like it will, I do not think Bitcoin will be able to recover again. What could also happen is that Bitcoin might take the whole cryptocurrency industry down.

2 Replies to “How Bitcoin is a Scam”

  1. Thank you so much for sharing such an informative post. I have been investing in bitcoin for over 5 years now but as a long-term investor, I tend not to pay attention to the trend too much. But I have to say, I was so happy and just wanted to sell it all. Who knew that the technology is that old? Luckily I invest in other cryptocurrencies as well. I agree, it is not an asset. I am sure that the bubble will burst soon too. Thanks for sharing something to think about.   

    1. Thank you for taking the time to comment on my post. Yes, bitcoin technology has become obsolete. That goes to show how fast technology moves. My aim with that post is to warn people about the serious issues bitcoin has to deal with, because with all the Elon Musk and the make easy money fast hype people tend to overlook. 

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