Is Bitcoin really a scam?

Nassim Taleb definitely thinks so (see my tweet below). He talks about Bitcoin being a Ponzi scheme, which is just a special kind of financial scam. 

Taleb is a well-known finance personality with a respectable Twitter following, cultish to a large extent, which I consider rather problematic – in general, not just in his case – though I am not saying he is to blame for that. He is an author of several popular books, which I have found interesting and even recommend at least one of them on my website. He is known for strong opinions, not in the least about his adversaries, whom he considers pretty much universally stupid – well, I may be simplifying things a bit, just to be facetious, but probably not that much. 

Anyway, as I noted in my tweet (a retweet, actually), my take on this Bitcoin issue is a bit subtler. I presented it in a pretty recent post on this blog and also addressed it briefly on my site

Taleb is certainly not alone in his opinion. And hardly the first one to state this so bluntly on social media or on a blog. 

Still, the public appears to be very divided on this issue, with the Bitcoin advocates trying to justify the current cryptomania as the beginning of something so totally new that only few can really comprehend it. Well, they may be right as only those early few will surely benefit from this bubble. Taleb’s opinion is shared by those convinced that bubbles sooner or later burst as the history of such events shows. Count me in this camp. The laws of economics would have to change for this case to be different. Now, this would really be something extraordinary. 

I am, however, betting that Elon (of the Musk family), the guy behind some of the pretty recent Bitcoin activity, will sooner land his people on Mars than this will happen. And they are not getting there by 2030, for sure. By then, the Bitcoin bubble may just be a bad memory for too many, I am afraid.  

Keep in mind that Elon has very deep pockets. He can afford more than ordinary pikers, and most of us are just pikers from the point of view of the size he can trade. He may even know who that Satoshi guy is and what he has really been up to with his scheme. Impossible? Perhaps not if you are the richest guy in the world, which he was just recently. He may trade on information you are not and will never be privy to and he may time his moves the way you will never be able to. And with his large clout through social media he may use you to facilitate his moves. This is not a sound proposition. Even if we talk only about possibilities here. This is always a problem with poorly regulated markets. They can be easily manipulated. By the big fish, and you ain’t it. 

This is not to say that I suspect Elon Musk to be engaging in some Bitcoin shenanigans, but merely that there is plenty of room for manipulation for whales like him and others we may even never heard of that are pulling the strings. Judging by how much volatility is in the Bitcoin price, some of it may as well be due to that.  

I find the whole situation pretty dystopian. It’s like living in a split virtual financial Universe that is bound to disappear eventually like a bad dream as they, by their very nature of being virtual, always do. 

I have no position in the crypto markets and look at the whole spectacle from the position of curious and increasingly amused a bystander. Still, I would not advocate any crypto investment at this point to anyone except really those with money to burn. Nor do I plan to take any long term position in these markets myself. Trading them is a different story, but I have no plans for that either.

However, I am also afraid that if Nassim Taleb is right, and he may well be, then many people will get burned really bad and this may forever project on their view of financial markets. There are always good trading opportunities in the markets that have been around for many decades, are well regulated, and decently liquid. Once you have mastered trading them, you can easily augment your income without chasing another dogecoin or some other crypto. 

In fact, the very term “crypto” sounds like a warning from the future. In 10 years or so, we may be telling tales from the crypt (pun intended) whose protagonists are hapless Bitcoin “investors.” 

The recommended markets I alluded to above include stocks and futures, the latter, due to leverage, for the less risk averse crowd. You may want to check out what I have to offer in this respect. 

For stocks, especially if you are just a beginner, you may be interested in my original trading method that is based on fundamental analysis rather than technical one as is the case much more often. 

While I used to trade the stocks for several years, mostly during the Internet mania of the 90’s, for nearly two decades by now I have specialized in trading e-mini futures markets and my flagship trading product is an e-mini futures day trading course, which I particularly recommend your attention. 

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