Cryptocurrencies Show Just How Nuts Things Have Gotten

Up 7,000% in two months, then it crashes.

The market capitalization of Ethereum, the second largest “cryptocurrency,” has soared 88% in a week, from $8.4 billion, when I pooh-poohed it on May 15, to $15.8 billion at the moment. Today, the price of the token jumped 15% to $172.26, as I’m writing this. It has skyrocketed 2,000% from January 1 when it was $8.15, and 25,000% since September 2015, when it was $0.68. A veritable miracle of creating wealth out of nothing (chart via WorldCoinIndex):

Bitcoin, the largest of the cryptocurrencies, is up 7% today, after soaring all weekend. At $2,211.56 at the moment, Bitcoin has a market capitalization of $36 billion, up from $30 billion a week ago. It has doubled since April 1 and “edged up” – compared to some of the others – a mere 122% year-to-date (chart via WorldCoinIndex):

Every one of the 800+ “cryptocurrencies” other than Bitcoin – from the ones that are already dead to the new ones that showed up out of nowhere – are the alt-coins. And there, like with Ethereum, the fun to be had is even greater.

Look at Ripple, the third largest. It’s already crashing. It had gone from $0.006 on March 15 to $0.42 on May 16, an increase of nearly 7,000% in two months. When I ridiculed it on May 15, it was at $0.215. By the next day it had doubled to $0.42. Now at $0.29, it has lost about 30% of its value since its peak, including today’s 10% swoon. Its market cap, now at $9.9 billion, has plunged $4 billion in a week (chart via WorldCoinIndex): .

Next largest alt-coin is Gnosis, which came out of nowhere on May 1, after its “initial coin offering” (ICO) – which is like an IPO for stocks but without the legal hoops, disclosures, and registration to jump through – at a price of $30 per token. The ICO raised $12.5 million for someone. Since its ICO, the price jumped 663% in three weeks, to $229 (chart via WorldCoinIndex):

If trading these tokens isn’t quite wild enough, you can also trade derivatives of these tokens. For example, according to BitMex, you might want to trade Gnosis futures. You can even use leverage to put some spice into it:

Traders who think that the price of GNO will rise will buy the futures contract. Conversely, traders who believe the price will drop will sell the futures contract.

All margin is posted in Bitcoin, that means traders can go long or short this contract using only Bitcoin. The GNO futures contracts feature a leverage of up to 2x.

For example, to buy 10 Bitcoin worth of contracts, you will only require 5 Bitcoin of Initial Margin.

Is this the embodiment of the new way of wealth creation? Anyone creates a “cryptocurrency,” gets exchanges on board, hypes it, gets other players to pump in actual currency, and participate in this miracle of a digital number backed by nothing and representing nothing, with no coupon payment and no ownership of anything other than the digital token, hoping fervently to sell it back and forth among each other with the agreement to not ever try to convert it back into real currency because that would cause it to collapse – see Ripple.

After these blistering surges of thousands of percent in the shortest time, no one is even trying to pretend that these are usable currencies. That notion has totally fallen by the wayside. They’re not even called “cryptocurrency” anymore. They’re cryptocoins or alt-coins or bitcoins or just tokens.

Of these 800+ schemes, the top ten alone have now ballooned to a combined market cap of $70 billion. That’s a serious amount. Next week it might be $100 billion or $40 billion, whatever the case may be.

They have become the favorite playground of some hedge funds that can with – for them – relatively small amounts of money drive up the price by thousands of percent.

But how do hedge funds get the real currency out of it – the money that they need to distribute to their clients? They’d have to sell their stake for real currency, and then the game is over, because just like their entry causes a huge surge, their exit causes the opposite – the type of event that Ripple might already be experiencing.

The funniest thing is to listen to all the logical sounding pseudo-reasons why this surge has happened, ranging from the impending collapse of the fiat currency, such as the dollar, to getting in on the ground floor of the future, or something.

On a more philosophical basis, these manias make you wonder about the state of the mind of today’s “investors” including hedge funds that play these games with increasingly hefty amounts of money. It’s symptomatic for something larger. But then people also play the lottery, which someone once called a special tax for those who can’t do math. So looking at these cryptocurrencies, I’m not yet predicting that mankind is totally doomed. But it does make me marvel at how so much liquidity for so many years has inflated asset prices all around and to such an extent that the craziness in these cryptocurrencies barely makes a, well, ripple.

After surging for years, quant hedge funds – where trading is done by machines, not humans – now dominate stock market trading. Read… Can Quant Funds Trigger a Stock Market Crash?

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  123 comments for “Cryptocurrencies Show Just How Nuts Things Have Gotten

  1. AC says:

    Isn’t Bitcoin designed to be strongly deflationary? Anybody actually know?

    • Suzie Alcatrez says:

      The limit of 21 million bitcoins is “hard-wired” in to the protocol, and there will never be more bitcoins.

      Minus those that are ‘lost’ on hard drive crashes.

      • Jeremy says:

        BitCoin probably isn’t quantum computing safe, so those “lost” coins may return at some point. :)

        • Sorte says:

          And if the fork as discussed? 21M become 42M (yes, two different coins, but still). Early adopters’ CrytoQE, IMHO.

          What assures anyone that they won’t fork to infinity?? That would really be creating something out of nothing.

        • Kent says:

          The alt-coins represent that never-ending forking. And MIT just cracked SHA-1. So, like any software technology, bitcoins will have a limited shelf life.

        • JeremyIsDumb says:

          Quantum will affect both sides. Attackers will have more power but so will the miners protecting the Bitcoin network. Status quo is preserved.

      • Sandi says:

        As far as I know the bitcoin protocol developers can change alghoritm at any point…

  2. Jas says:

    Great article, Wolf! Too much luquidity floating around + low interest rate environment = asset bubbles. Sometines massive ones! On 1/2/2017 I bought 15 etherium coins for $127, last night it was valued at $2,600. I hope the party is just getting started.

    • cdr says:

      Sorry, not that complicated.

      All you’re measuring is the demand for money laundering.

      Crypto currencies are the means for that. Flexible pricing is market risk for money laundering, and possibly the take for providing the service.

      Do you want to move cash from China to someplace more agreeable? Or other cash earned via illegal methods? Use a crypto currency.

      Rising prices and the growing number of cyrpto currencies are a reflection of demand for money laundering that bypasses the old time green eyeshades.

      Suckers in the SEC and elsewhere marvel at monetary innovation. It’s just money laundering in plain sight.

      • Meme Imfurst says:

        Looks like a perfect opportunity for a hacker or NSA to make an instant withdrawal.

        I am beginning to think cell phones are slow cooking everyone’s brains. Microwaves are microwaves, after all.

        • cdr says:

          If you google a bit, I think you will find the occasional principal of a crypto-fund walking away with pockets full of bits and bytes. Hard to prove, from what I think I understand.

      • Dan Romig says:

        Speaking of money laundering, Pam and Russ Martens have an interesting report today regarding Citigroup’s slap on the wrist by Trump’s Justice Department’s non-prosecution agreement and a $97.44 million fine for “willfully failing to file Suspicious Activity Reports (SARs).”

        • Gershon says:

          HSBC and Wachovia laundered billions in drug money for the Sinaloa Cartel. They were caught, paid slap-on-the-wrist fines amounting to a fraction of their ill-gotten gains, and no criminal charges were filed against anyone.

          Attorney General Eric Holder was rewarded for his “see no evil” stance toward these TBTF banks with a plum Wall Street job and $2 million salary for services rendered while a “public servant.”

          Laws are for the little people.

  3. TCG says:

    Bitcoin tapers the number of coins it mints (“mining”) over time until it stops minting anything new sometime in the future.

    Supply grows less over time (scarcity if there are more new users buying more ‘than the increase in supply by mining) and they say coins can be divided into very small fractions for trading or buying or whatever.

    I’d guess it’s designed to inflate in value (thus be deflationary) over time. I’m sure the creators love that aspect when they cash out with huge run-ups in the price of coins that they created for themselves.

  4. Gershon says:

    Yellen sees no bubbles.

  5. Bobby says:

    Imagine if other players get in, googlecoin, applecoin? One of these systems may get crushed; more mania to come is assured!! ( this tops the beanie baby craze!) What I find interesting is the amount of energy the bitcoin miners require, 134 Gigawatts for a miner in China? (according to wiki) sounds like a recipe for disaster when people want out..

  6. Tom says:

    Cryptocurrencies are indeed the purest form of a mania. Creating something out of nothing and then creating an artificial scarcity of nothing by limiting the amount by which nothing can get created and divided, the inventors are geniuses of the human psyche to have been able to make money out of this insanity. Even beanie babies make more sense from an investment perspective. Reading forums of cryptocurrency supporters, it is interesting to see that these people have not the slightest doubt that the currencies will rise forever, another sure mania sign. Rationale is scarcity and buzzwords like the ‘disruptive nature of the blockchain which will change how society works’. The latter statement is particularly odd, because problems with it have been emerging for a while in Bitcoin. From problems that could be solved technically, such as the limited block size causing severe transaction delays and transaction fees above 1$ recently, to conceptual problems, such as its ever growing size. We are already seeing a centralization of blockchain hosters with the growing size, and that is at low transaction frequencies, once it would reach Swift levels, it would grow into the hundreds of TB, and guess what, at that point no private person would be hosting any more leaving the blockchain to institutions like banks, what a fantastic concept for a decentralized currency.

    • Mike says:

      Here’s a little mania for you. . Regardless what happens with any of the krypto joins. . The insanity lies in the idea that the dollar will live on in infamy. . The dollar will surely die like all other paper currencies that before it or that will come after it. . The greatest theft in the history of mankind has been perpetrated on humanity for centuries. . If more knew how these currencies have enslaved us for generations. . Governments around the world would fall tomorrow. . But complacency and acceptance are the norm. . And the sheep have been herded and kept unaware for far too long now. . But for me. . I like silver and a little gold. . But I’ve also bought some krypto Kash cuz one thing that I know to be a mathematical certainty. . Dollar gonna go bye bye. . And when it does it will the biggest catastrophic event in world history. . WTS. . Be a good little boy scout. . Be prepared. .

      • RD Blakeslee says:

        Mike, so-called “preppers” (at least the common sense ones who have devised means to sustain their lives which have some possibility of succeeding) have been preparing for life without “money”.

        We use “money” like everybody else. Part of the common sense is to realize “money” is more likely to last longer than our lifetimes, but, just in case …

      • Kent says:

        “The dollar will surely die like all other paper currencies that before it or that will come after it.”

        Gold and silver both failed as currencies. I can purchase food at my local grocery store with paper dollars. They don’t accept gold or silver. I’ll take a thousand dollars worth of paper dollars any day over a thousand dollars worth of gold or silver.

        • jb says:

          Utah accepts gold/silver as legal tender. Other states have bills pending .I know of one gold bug that has a product where you can attach a debit card to your gold stash.

        • Coaster Noster says:

          Yes, and with today’s sophistication, it’s probably easy to put together a gold “Kruggerand” carrying tungsten or depleted uranium, and .80 ounces of gold, but looks and weighs totally authentic. And what store owner is going to do a sophisticated measurement, in order to take your gold coins, from anywhere?

          Bitcoins are collectibles and not currency for one reason: you cannot pay your taxes to a sovereign entity with any bitcoin. End of story.

        • “Gold and silver both failed as currencies. I can purchase food at my local grocery store with paper dollars. They don’t accept gold or silver. ”

          This is the problem! You don’t get it. Then last time we directly used Gold and silver to purchase bread was in medieval times. When people say returning to a Gold Standard, it’s just means that the Paper currency will be backed by Gold. It is not that you will be able to take gold to Walmart and purchase goods. But you will be able to take gold to bank and get equivalent amount of dollars, just like I can take Indian Rupees and convert it to gold. Is it that difficult to understand?

          Also all the backers of Crypto currency don’t under-estimate Government. If they want it banned, they will do it. What if US Government passes a law which puts 15 years sentence for anyone who is found with possession of Crypto Currency. Since it is public, they can easily track. What will you do when they do something like that?

        • d says:

          “Also all the backers of Crypto currency don’t under-estimate Government. If they want it banned, they will do it. What if US Government passes a law which puts 15 years sentence for anyone who is found with possession of Crypto Currency. Since it is public, they can easily track. What will you do when they do something like that?”

          In china on may occasions in History, it has been punishable by death. To trade in gold and silver instead of the emperors worth less paper currency.

          Didn’t stop them then, and won’t stop them now.

          ““Gold and silver both failed as currencies. I can purchase food at my local grocery store with paper dollars. They don’t accept gold or silver. ””

          Asian store owners have their uses.

          “Cant take gold or silver to the chain market.”

          I can take Both to the local Asian owned store. What’s more if I place an order with her, for goods from any store that does not take gold or silver, she will get it for me, and take gold and silver for it.

    • intosh says:

      Good comment.

      It’s incredible how stupid some people are. But at the same time, there must be very cunning and smart people on the other side, scheming to lure the greedy idiots in. I was at dinner recently with some friends and one of them told us how he is making thousands of profit with Bitcoins and revealed how highly leveraged his play is. The others are considering getting in on the game. I brought up the elephant in the room: centralization. I heard crickets chirp. The whole mechanism is based on computing power. Computing power = money. A handful of bitcoin mining farms forms a monopoly having authority on the ledger. So how can bitcoin be decentralized and democratic?

      The average people are starting to hear the siren call. I think this scheme is going to last for a while — not enough average joes in the game yet. The inevitable crytocoins crash may very well trigger a global economic crash of everything, like dominos.

      • Pants Down says:

        “The inevitable crytocoins crash may very well trigger a global economic crash of everything, like dominos.”

        $70B market is gonna trigger a global economy crush!? oh, my… these cryptos must be very powerful then.

        Is it because Blockchain technology can really be applied to any “asset” that can be stored, distributed or transacted – property titles, music, insurance, physical goods and assets, even your data…

    • Soosh says:

      Read the whitepapers. Download some of the apps/dapps/wallets. Talk to the devs and hear their vision. corrections will happen on the way up. I’m expecting at least 50%, then up further. A lot of chains will not make it. So what. Happens in business every day. At least we are allowed to have natural pullbacks which is healty. Unlike the stock/housing markets

      • Pants Down says:

        It is a bubble.
        Just like everything else b/c of collapsing fiats around the globe, and idiocy of QEs and negative interest rates. Minus Central banks’ plunge protection/backstopping.

        Of course, the world’s leading central banks themselves (the FED in US, Japs, EUs, Australia, even Russia) are already exploring implementation of … not gold. And so are their master-banksters are preparing for reset…It is a fact.

        Now. Can someone please explain how and how long it will take switch from fiats to transacting in gold or platinum?

        Seamlessly. Globally. In the age of internet. Please!

    • roddy6667 says:

      Invisible tulips!!! I want some!!!

    • Pete says:

      I agree with your perspective on the insanity of the crytpo-currency craze. In fact, you’ve probably written the single best sentence I’ve read on the topic “Creating something out of nothing and then creating an artificial scarcity of nothing by limiting the amount by which nothing can get created and divided, the inventors are geniuses of the human psyche to have been able to make money out of this insanity.”

      That said, your assessment of blockchain is an entirely different matter. That technology is a game changer that several banks as well as many of the most highly regarded VC’s on the planet have embraced. The problem that the little guys who “invest” (more like gamble) on the cryptos aren’t seeing is that many blockchain platforms don’t require the use of their crypto for access to the blockchain so the crypto currency scare or not doesn’t provide anything of real value for a legitimate movement of funds. The crypto’s are advertised as reducing cost and providing a store of value, but it’s laughable to consider something a store of value when it can drop to zero if a company goes bk and/or has the volatility these “mediums of exchange” have had.

      I suspect the regulatory framework will eventually catch up with the technical innovation and will render the use of a crypto currency illegal in the future.

    • The Major says:

      It’s also a double-edged sword, thanks to the blockchain….

  7. walter map says:

    Does anyone actually buy anything with one of these things, or are these CCs just objects of sheer speculation?

    Maybe it would be safer to stick to fiat currencies. Those are at least backed by ruthlessly ravenous banksters and you can use them at the Quik-E Mart.

    Never mind.

    • MC says:

      You can use them to pay the hackers holding your computer data for ransom. Or to buy “performance enhancing” drugs on the Dark Internet.

      See, they do have an use.

      • Ash says:

        You can spend bitcoin almost anywhere now as there is visa debit cards such as xapo that link to your bitcoin wallet … also it’s not just for the dark web … remember money is not bad it’s the person and what they are willing to do to get it … the haters will miss the profits to be had as we transition into the new monetary system .. fiat currency is collapsing all over the world and the crypto currency are rising .. don’t waste time being scared of the technology just simply embrace the world we are heading into and thats one with electric cars all smart devices connected and a complete online currency … buy ethereum and bitcoin and now and smile later :)

        • MC says:

          I hope this comment was made in sarcasm… otherwise good luck, that’s all I have to say.

        • thelocalpragmatist says:

          “buy ethereum and bitcoin and now and smile later :)”

          Yes…trust me….

        • kevin says:

          Attn to: Ash. Nope. nope, nope & nope.
          Nope. You can’t spend bitcoin “almost anywhere”. None of my local grocers take any cryto-currencies. Neither does my pawnshops nor porn-shops around here. lol. And fyi, I live in a developed country with easy access to WiFf/Internet as well as smart phones.

          Nope. SOME Fiat currencies will certainly collapse, like rouble once did back in the 80s, or the Argentinian Peso in the 90s, and the useless Venezuelan bolivar now. They have been collapsing for centuries, but the politicians ALWAYS manage to craft a new one to replace them, and the sheeple ALWAYS accepts the “new” it. Fiat cash won’t go away anytime soon.

          Nope. I’m not scared of tech. I love tech and the amazing things it can do. However, I can differentiate hype from practical considerations. I might waste some spare cash fiddling with fitbit and fanciful but mostly useless gadgets but I won’t “play” with my capital on new-fangled cryptos that are way too easy to hack….and besides, its in bubble territory now.

          Final Nope. I can assure you, you won’t be the one smiling if you buy eth/bitcoin/alt-coin now. I’ll be SELLING it now if the exchanges allows short-selling of these cryptos, or if I own any now…which I don’t.

          Nice try Ash…on the pump & dump though…wrong forum to try this trick however. Readers here on WS are mostly discerning ones. lol.

        • kevin says:

          oh, btw Ash…

          Did I forget to mention to you that the largest mining pools and the vast majority of miners are now in China?
          Current published data says Chinese miners are now taking up volumes of about somewhere between 43% to 48% of the world’s bitcoin compute…. my own estimates are higher…likely in the range of 51% simply because there is such a thing called 51% attack. China plus 51% attack. Oops. lol.

          Don’t panic Ash….better dig out your hash password you hid under your mattress and SELL while you can.

        • Gershon says:

          Good luck luring in more Greater Fools. When the supply of new bag holders dries up, these make-believe “currencies” are crashing to their inherent value: zero.

  8. Captain says:

    “But how do hedge funds get the real currency out of it – the money that they need to distribute to their clients? ”

    Think of it like real estate. The gains are used as collateral for more liquid assets.

  9. John says:

    Isn’t this just what we already learned. Wall Street and it’s “investments” are fundamentally based on other people’s expectations and nothing more. A circle jerk of enormous proportions.

  10. John M says:


    I find the study of parabolas fascinating. Is there a chance that in this era of parabolic chart left, right and in front of us that you do a small write up of your experience on this chart formation?? (Its been my experience that they usually end badly!)

  11. Maximus Minimus says:

    When you build it, they will come. When you create and environment for manias, they will happen. I guess, there is no need to say who created the environment.

  12. Raymond C. Rogers says:

    Remember the girl who said the empire was not wearing any clothes? This year she is saying he doesn’t have any wealth either. Let us see who hears her first?

  13. All these schemes are schemes... says:

    Since these crypto “currencies” have completely unregulated markets, what you see with price increases is simply the result of people trading with themselves using different “names”, at increasing prices. The goal is to suck in, well, suckers, who think there really are people willing to pay these increasing prices at arms-length; they get sucked in, thereby becoming that person they believed existed but never existed since the whole price run-up was just a show intended to suck in greedy suckers. Oh the irony. The big problem is that I can hold some what-have-you “coins”, create thousand a “pseudonyms”, and write a little script (create a bot) that gets all of them buying and selling my “coins” to one another, at prices that my script specifies. Crashes, same thing: nothing like a good crash to suck in new suckers if they are no longer getting sucked in by the artificial run-ups!

    • cdr says:

      “Since these crypto “currencies” have completely unregulated markets, what you see with price increases is simply the result of people trading with themselves using different “names”, at increasing prices”

      Nice catch. That, too.

      • roddy6667 says:

        Watch the movie “Wolf Of Wall Street” Cryptocurrencies smell like a Pink Sheet Pump And Dump on steroids.

    • Kent says:

      Used to see that in real estate too, where a few brokers would buy and sell a couple of houses to each other so that they can act like prices are increasing. So you better buy now or be priced out forever.

    • Professional cryptographer says:

      It is a mystery why nobody in the media is reporting on the fact that it is this scam that is solely responsibly for driving up prices for all these crypto “currencies”. Most reporters have no clue how broken these systems are. For example, why is nobody noticing that it only takes a few miners to collude in order to completely break Bitcoin? Basically, three or four Chinese kids need to get together; they likely already do that on a regular basis to discuss how to plunder the system by the time the bait scam is reaching its end. As for blockchains, since they rely on Bitcoins, or somthing similar at least, they are as broken as the underlying “currencies”.

  14. MC says:

    Exactly the same graphs as with the Shenzhen Small Caps between Fall 2014 and its crash in June 2015.
    IPO’s were considered unsuccessful if the stock didn’t go up at very least 30% in the first week during that time frame. I remember Huajiang, the umbrella manufacturer, went up 110% in the week following its IPO.

    Like all crazy bubbles it went on for far longer than anyone expected and then the Chinese government enacted a partial bailout when retail investors started taking to the streets and beating on their pans. These days the PBOC, just like the BOJ, intervenes each time Shanghai and Shenzhen lose more than 0.2% to keep daily losses below 0.9%. It’s costing them untold billions but keeps retail investors from taking to the streets while giving a semblance of market forces at work.

    I don’t think anybody will bail out these cryptocurrency speculators… or at least I hope.

    • am says:

      Yes, what makes this interesting is there is no backstop to this wild speculation. This is pure mania on display. It really is unlike anything else in modern times. This is what the stock market would resemble in Barter Town.

      • Mel says:

        “It really is unlike anything else in modern times.”

        I dunno. Making new cryptocurrencies to speculate in?
        It’s just like 2006 when they made new junk subprime mortgages to bundle up and keep the CDO game going.
        It’s just like 1929 when they ran out of stocks to trade, so they incorporated Investment Trusts which were created to buy and hold stocks, including the stocks of Investment Trusts which had been incorporated to augment the supply of stocks.
        It’s got me thinking back to 2007 when the banksters contrived to lose all the money there was. Because they ran the international clearing system, they were able to extort enough money from the rest of the world to set themselves back up just the way they’d been. It occurred to me at the time that Bitcoin could have been the foundation of a payment clearing system that didn’t have the banksters’ guns to its head. But it’s been dissolved in The Game. The volatility that The Game needs to stay fun is death to anything else, anything real. Astonishing, isn’t it, how useless the world has become.

        • MC says:

          That’s another interesting parallel with the Chinese stock market bubble.
          Most of the IPO’s on the Shenzhen Small Caps after 2012 were carried out by firms which had absolutely no need to rise capital by going public and which, more often than not, lacked staff with any experience or even training in how to handle a public company.

          The China Securities Regulatory Commission (CSRC) has far more sweeping powers that the SEC: for example it is the only body authorized to pass judgement on securities-related litigations in Mainland China and can deny listing without giving a justification. In short they could have killed the bubble before it was born without too much fuss, but decided to let it inflate, only to panic when it burst.
          It could have been a trial balloon floated before the present real estate mania, which shows no signs of slowing down (“investment grade” property now has a far higher per meter valuation in Shanghai, Shenzhen and Beijing than in the San Francisco) but the genuine panic among Party officials I saw back then does not bode well for the future.

  15. Vadim says:

    I traded cash for bitcoins for around 3 years with around 5% spread and gained a lot, but now with all these idiotic altcoins and manic speculation I stopped. I only trust Bitcoin as a technology, but now I don’t like that it’s used mainly for gambling and speculation (altcoins, ponzis, all sorts of schemes). Almost all the altcoins are pump-and-dump schemes, and greedy people flock into them and get happy when they see numbers increasing on their screens.

    From curiosity I looked into Dash when it was pumped hard a month ago. I found there was almost no development activity for 3 months (few commits) and in it’s blockchain explorer most transactions were to and from the speculation website’s addresses, or generated by mining pools. This is not “genuine” use as a sort of currency.

    The manic speculators use a handful of websites to get rich quick. Many of them come from Bitcoin wanting to get rich quick again and increase their Bitcoin holdings. I met with a group of them for some beers and they seem obsessed to detect altcoin pumps at the beginning, “invest” and sell at just the right time. They try to figure out how many “bagholders” an altcoin has and when is the time to “rebuy”. Coin X is bad because it only went up 4x and it doesn’t seem to have enough bagholders.

    I think regular ponzi schemes (“investors” working with your money and giving you part of the profits) are bringing OPM into these cryptos. So average people plow money into the ponzis, which then plow money into cryptos, and everybody gets rich quick. Obviously the average people only care about getting more money back and don’t ask any questions.

    This is what super low interest rates do, I hope it ends soon. I want all altcoins to go to 0 and people return to productive activities.

    • Jonathan says:

      “This is what super low interest rates do, I hope it ends soon. I want all altcoins to go to 0 and people return to productive activities.”

      That’s the part I find infuriating. We set up a world with a financial system that increasingly incentivises our best and brightest to become myopic thieves and parasites working on the next Ponzi scheme of the week than putting their minds into the advancement of mankind.

      • harvey says:

        “We set up a world with a financial system that increasingly incentivises our best and brightest to become myopic thieves and parasites working on the next Ponzi scheme of the week than putting their minds into the advancement of mankind.”

        Take those away and I fear they will all try to work for the government next, that’s what is happening to Japan’s best and brightest right now, everyone wants to be a govt. employee.

        • d says:

          “that’s what is happening to Japan’s best and brightest right now, everyone wants to be a govt. employee.”

          Low level govt employees dont get paid that well .

          However unless you make big mistakes, you never get fired and with in reason, you get continuously promoted based on seniority.

          The old Japanese Job for like only exists in state employment now and the Japanese, like stability in employment.

          One of my grand father started in the British post office at the end of the 1920’s and worked there his whole life. He was forbidden by the state to enlist and worked extra duty as an air raid warden 1939-1945 in London.

          He was never rich but brought his own house, car, and always had food. Those things were always important to those who lived through the 1930’s and the war.

          Unless you are a high flyer. In times of employment instability, the state is your best option.

  16. Frederick says:

    Annnnnnd it’s gone Anyone buying into this insanity deserves what they get

  17. michael Engel says:

    Multi ghost coins design by crypto computer science engineers.
    The world architecture today is very different from the deadly world
    of 100 years ago, designed by 2 very ruthless, aggressive, pretender small islands, one in Europe, the other in Asia.
    It’s the world of the Kaiser, Mattis & Tillerson vs Putin & Xi.
    – it’s friendly commercial, not deadly.
    – it will transfer power to the “strong hands” states.
    – it will allow debt to deflate, not to hyper inflate. Some debt forgiveness.
    In between global activities, Trump will stay out of the swamp.
    He will disappear, under Dr. script, until his next glorious trip.
    Unavailable, beyond reach.

  18. William says:

    Many of these alt-coins will probably prove to be worthless in time. However, bitcoin, eth, zcash still have enormous potential I believe. I remember seeing an interview with david harvey, where he spoke of the vast amounts of capital desperately in search for yield. Or consider this article by Charles Hugh Smith:

    So let’s imagine a scenario in which tens of trillions of at-risk wealth suddenly seek an alternative–any alternative to staying in an asset class that’s circling the drain. We’re accustomed to “rotation,” the nice little game where bonds can be sold and the capital invested in real estate or stocks, or vice versa.
    We’re less accustomed to all the conventional asset classes toppling like dominoes. Where do the fleeing trillions go when stocks, bonds and real estate are all going down in a chaotic sell-off? Gold and silver are time-honored safe havens, but it’s not too difficult to foresee the potential for limits or bans on gold, or supply constraints. Some percentage of investors will consider alternatives.

    You want farfetched, how about $3 trillion in panicky fleeing capital flooding into bitcoin? Yes, a whole, gigantic, enormous 1% of speculative financial “wealth” and “money” seeking a home in cryptocurrencies.
    (It’s worth doing the same exercise with gold, only substitute $6.4 trillion in market cap (i.e. all the non-central owned bank gold) for bitcoin’s $14 billion market cap.)
    Cryptocurrencies are intrinsically volatile and speculative. Anyone pondering them must keep this firmly in mind at all times. There is no “guaranteed” safety or guaranteed anything. Everything that appears solid can melt into thin air (to borrow Marx’s phrase) without advance notice.

  19. ThinkAhead says:

    You guys should do some homework on ethereum before you trash the idea. It is different and it will change the way the world does business. ?

  20. If I wanted to create a world where only me and my best buds had money and everyone else had to scrabble for pennies I throw from my Lear, well I’d follow two broad strategies. For the older folk, I’d create a mad mad world that only superficially resembles the capitalist model they thought they knew, where every dollar invested is as shaky as a tightrope walker in a hurricane.

    For the younger folk, though, I’d flatter them that they’re soooo much smarter than their parents ever were and that these crypto-currencies are the smartest thing since smart bread. I’d play it up, and get all those yield-desperate funds to invest as well…and then, once I was sure a hefty number of Millennials had bet their server farms, I’d take down the entire edifice. There are already so many excuses. They’re being used to fund terror! They’re being used to buy drugs! They’re being used to buy porn! Think of the children!

    Remember too that the dark web (and Tor) was created by government agencies, so they sure as hell know how to switch it off. Anyone who thinks they’re “anonymous” on the dark web/using Tor has rocks in their head. I bet it’s the same with Bitcoin and its ilk. I wouldn’t touch any of them with a very long disinfected pole.

    • junior_kai says:

      Yep, at least much of it sounds like honey pots, set up to attract flies. Which agencies from which governments set them up is the only open question. Probably a few international mafias also rode their coattails.

  21. pete says:

    Is bitcoin the next gold?

    Over the centuries, people fled to gold in fear of their paper money losing value. Could the bit-coin be the next disruptor — an alternative to gold? gold, curiously, is stuck in a trading range and very expensive for people to hold, so to speak. Certainly, it’s (a) the faith in gold over the centuries and (b) it’s relatively stable mined quantity, that has given this precious metal it’s value…could bit-coin be next?…PJS

    • gary says:

      “very expensive for people to hold”

      – what are you talking about? I have some in a box and it doesn’t cost anything. (if you are a sucker and want to pay a “custodian”, that’s your folly)

      ” it’s relatively stable mined quantity”

      – yes, but the quantity does increase slightly each year, which is an important attribute for money to have. So either bitcoin does not increase beyond it’s current limit in which case it would be ineffective as a money substitute (too much scarcity). Or, the scarcity problem is solved, but if you do that, what’s stopping there being an infinite bitcoins?

    • Frederick says:

      Pete Mines not expensive to hold Costs me zero as a matter of fact and gives me many years of good nights sleep Cash on the other hand with stealth inflation is indeed expensive to hold not to mention the risk of losing it if the banks decide they need a bail in like in Cyprus not so long ago

  22. r cohn says:

    Just a few questions
    How do US citizens trade these currencies?
    How long does it take to obtain monies once you sell your position?

    Anyone who believes that the encryption algorithm behind these currencies is unbreakable is deceiving themselves
    Did not the Germans in WW2 assume the Enigma machine was unbreakable without a key?

  23. WhiteRider says:

    I wouldn’t consider Ripple “crashing” just because it pulled back from $.40 to $.32 when it was way less than a penny a few months ago. How’re those mining stocks working out for you?

  24. Everett says:

    Good article,
    IMHO “cryptocurrency” brings the insanity of paper to the next level. Furthermore, it proves that the adults that are participating in this madness could play a convincing role on the playground as Batman and Robin.

  25. Ricardo says:

    So according to the major news people when the anywhat or whatany or whatever its called virus was released the computer terrorists wanted to be paid in Bitcoin and then on top of that the value of their virus damage only amounted to $26,000. I assume those $ were green backs.
    So we have a currency that can’t be redeemed for actual cash or money in the bank and on top of that their total take was all of $26,000 which they can’t redeem in cash.

    Interesting that the word cypto comes originally from the Greek word Kruptos which means “hidden”.
    That sums up perfectly these currencies and the $26,000 hackers.

    • Kent says:

      Wouldn’t it suck to have $200 worth of bitcoins in your wallet on your disk drive, then have it encrypted in a ransomware attack where they demanded $300 worth of bitcoin?

      • Vic says:

        You can easily make an offline backup of your private keys and move your bitcoin to a new wallet. Or you can use online wallets, hardware wallets and paper wallets so a ransomware attack would not cause you to lose your coins.

  26. J. Batter says:

    Mr. Richter,

    Could you explain these recent market moves? I am confused as hell.

    US New Home Sales fall 11.4%. US Dollar strengthens + .11 and USD/JPY strengthens +.19, as S&P futures gain +3 points. Shouldn’t this tank the dollar and futures???


  27. Jor-El says:

    Speculation…Mania…Hell Yeah I’m all in!!

  28. Kent says:

    Has anyone on this site actually reviewed the bitcoin source code line by line to ensure there are no back doors? Do people here actually compile their own code? Or do they just trust whatever they download from the ‘net?

    The good thing with cash Federal Reserve Notes in your wallet is you don’t have to read a few hundred thousand lines of code to make sure it will be usable next week. Trust is hard to create and easy to break.

    • bandini says:

      Wow, completely backwards logic.

      There are thousands of developers and companies that make money by ensuring crypto is unbreakable. The would loose time and money. Its in their best interest to ensure security, just like a bank (although security in the banking industry is crap, just ask Bangladesh).

      Unlike the Feds/ECB that have no care in the world that they print fiat and in fact it benefits them. Devaluing currency and causing inflation, only increases their power with the wealthy and destroys the middle and lower class. Bank loans money based on nothing and sell these loans to unsuspecting customers. If you want transparency (what you’re suggesting by reviewing code), this sure doesn’t exists in the current financial industry.

      Really you would put your trust in a known rigged system? I’m sure holding fiat currency in Venezuela, Brazilia, Argentina, and Ukraine has worked out well. But I’m guessing any anti-crypto people think the USD will never devalue? Then why hold PMs? Its an alternative and if you believe in new technology, like Netscape in 1995, you take a risk.

      • Kent says:

        “There are thousands of developers and companies that make money by ensuring crypto is unbreakable.”

        That’s the theory, but is it really happening? Libssh went for more than a decade with crucial security holes. Just about everyone on the planet used it and no one was actually reviewing it.

        SHA-1 was broken by MIT researchers a few months ago, without a brute force type attack. How long before SHA-256 goes the way of the dino?

        • bandini says:

          If all crypto code is not be trusted especially ones that have had a lot more people review and use… then you can’t trust any encryption especially the ones from major financial institutions. But you have a bank account? Do you use online banking? In all likelihood they’ve had less engineers scrutinies their code if they are not already using open source. But you trust them???

          The argument to say they will be hacked is undeniable. Machine power and advances will occur to the point a vulnerability will emerge. But as with all software they evolve, to expect the a static system is an unreasonable argument. Bitcoin has already forked many times to solve many issues.

        • Petunia says:

          Encryption keeps out the normal or nosy onlooker. The truly interested won’t be deterred by it. It takes skill to break encryption and not everybody has the skills to do it, or the interest.

        • d says:

          ” It takes skill to break encryption and not everybody has the skills to do it, or the interest”

          NO, it takes, Time, Motivation, and Money.

          Look who really cracked the I phone. FIRST, and still nobody knows, exactly when.

          Just like the western union deal, the Bigmouth US, also blew for them.

          Because unlike America. THEY really need to know, what those Islamic Terrorist, are saying.

      • Petunia says:

        Key based crypto codes are all breakable, eventually. As for transparency in coding, it doesn’t exists. Hackers often picky back their code on another running program. You can write a program like this on purpose, or exploit one already written. Most programmers don’t know how to look for vulnerabilities like this in their code. Any programmer who learned coding from a boot camp class, doesn’t even know what I am talking about.

        • bandini says:

          But yet we have Linux, arguable the most open source project that almost all major companies use and trust as an OS. Where M$ corporation, has Windows one of the most hackable and back doored OS.
          To claim ignorant programmers are the problem and the reason to not trust an open source project like Bitcoin, seems like you’re not familiar with the review process. As well as understating the number of companies that are involved in the Bitcoin and ETH. Example

        • Petunia says:

          I wasn’t referring to the bitcoin process or code. It doesn’t really matter what the code is or where it comes from. That’s why there is so much hacking that goes on, because every system is vulnerable in some way, and every patch creates other opportunities.

    • Maximus Minimus says:

      Modern encryption technology does not rely on arcane software code, but on key generation. That in turn is based on math theory of large prime numbers.

  29. Petunia says:

    Just a few comments on bitcoin mining and its limits.

    Bitcoin mining is limited to 21M bitcoins but they can be subdivided. Since division, in math, has no limits, in theory bitcoin creation is unlimited. In reality the number of subdivided bitcoins is bound by the largest number a computer can process. Right now on a 32 bit computer that number is ~4B. But on a 64 bit computer that number is over 18 thousand trillions, yes, 18,000,000,000,000,000,000.

    So in theory, any crypto currency is unlimited and not scarce.

  30. Paulo says:

    I just came back from a walk following the trails on my land. I have money waiting in savings account to buy my neighbours place when they decide to sell, and will then use this as a modest rental….providing a break on rent price for a good neighbour/tenant. So, our property supplies us with a place to grow food, firewood, recreation, peace and privacy, and additional income. Bitcoin? naw, I’ll pass. I can leave my property to my kids. The rest of the stampede is all tulips, as far as I’m concerned. People making paper profits and leasing Beemers is certainly no substitute for real wealth.

  31. Halcyon says:

    1987 crash
    2000 crash
    2007-8 crash
    Italy on the ropes

    Kamakazie Kuroda
    Super Mario Draghi
    London Whale

    Opaque derivatives beyond human comprehension

    Puerto Rico

    “Hedonic” economic adjustment
    “Off balance sheet” accounting
    Blue Cross identity theft

    Wells Fargo stealing with fake bank accounts

    But. Yeah. Bictoin is the thing to attack because all of the rest of it is so filled with fiduciary integrity and watertight trust.

  32. Roger says:

    Bitcoin is an interesting technology to me but the main use I can see is a means of transferring money from point A to point B. It would be a lot harder to carry 1,000 pounds of silver and a couple hundred pounds of gold across a border than a chit for “money” or a proxy in that regard.

    Not unlike the original idea of Rothschild banking where you deposit gold at a bank in Germany and withdraw the gold in England. The actual transfer is a ledger statement.

    Personally though I would be more concerned with getting in and out before a crash or violent movement in prices. It is also worthy to note that something is only worth what someone else is willing to pay for it at that time…

    • d says:

      “Not unlike the original idea of Rothschild banking where you deposit gold at a bank in Germany and withdraw the gold in England.”

      Be fair that trading Method is as old as the Silk Road, if not older.

      It Originated in the ME. Possibly Borrowed from Jew’s, Who were using Note’s, long before Rome came, or china was.

      The Islamics copied it, and are still using it, which is what makes their money laundering, and Terrorist funding, so very hard to trace.

  33. Reason says:

    I got a question for you wolf.

    I know some people here in Canada use bitcoins to transfer money from China to Canada inorder to circumvent capital controls and buy real estate here. My evidence, “straight from the horse’s mouth”. This was last year. do you think this plays a role with regards to these insane price gains.


    • Wolf Richter says:

      In your scenario, investors in China send “money to Canada” to buy Canadian or US dollars or real estate or some other thing. So these investors use bitcoin to transfer that money: they use CNY to buy bitcoin in China. Then from Canada, they sell bitcoin for CAD or USD and buy that house or whatever… The result is a wash, in terms of bitcoin. They buy bitcoin, which might push up the price, and then they sell bitcoin, which might push down the price.

      However, if they leave the money in bitcoin, it would support the price of bitcoin.

      • Maximus Minimus says:

        But the sheer fact that bitcoin can be used for money laundering is pushing up the price, would it not?

        • Wolf Richter says:

          So according to my theory, only if they keep the money in bitcoin. It they use bitcoin as a laundry detergent, as I suspect, and then sell the digital pile of bitcoin and buy property, then it would be a wash again.

      • professorALTCORN says:

        > However, if they leave the money in bitcoin, it would support the price of bitcoin.

        I’m pretty sure that, having done what you describe, the Nefarious Renegade Bureaucrat from Hell would realize that the cryptocurrencies he had just briefly held were vastly safer from government seizure than real estate (but of course vastly riskier in plenty of other ways).

        At this point, having dipped his finger in the pool and not had his head blown off, he probably decides to leave 1% or so of the loot in cryptocurrencies the next “time around”.

        Summary: money laundering is the gateway drug to asset concealment.

    • bandini says:

      There are few articles indicating although China had been the biggest investor in Bitcoin (80%+, like you said to escape capital controls). As of Feb/March, Japan just blessed Bitcoin as an official currency as well as corporations . Given the turmoil in currencies around the world as well as overpriced property, its possible a lot of Chinese are not sure where to invest and are holding instead.

  34. John says:

    Interesting article! Now I have some investment grade Tulips to attend to.

  35. Gershon says:

    “Currencies” backed by nothing and created out of thin air?

    How long will the Federal Reserve tolerate this competition to its own counterfeiting operations?

  36. Vox1 says:

    Those who are advocating the rise and eventual wide spread legitimacy of alt-currencies would be wise to read about bearer bonds. The are nothing more than modern versions of such.

    • d says:

      They are worse as BB at least had a brick and mortar face behind them.

      There was nothing wrong with the good ones, Many are issued by good Bank’s. Except they enabled people to move large quantity’s of money from place to place anonymously. Hence they are no longer available in untraceable hard copy.

      Cryptos are based in a line of code in cyberspace, ultimatly.

    • d says:

      BTC has done this before, at other levels, this is looking like a classic Asian driven. BTC pump and dump.

      Hope your account has Hedging enabled, and your ready with your Short Cover to protect your profits.

      If you are in the BTC game.

      I can almost hear the margin call alarms already.

    • professorALTCORN says:

      > This is beyond nuts.

      Dear Gershon,

      There is a technical term for the phenomenon you describe. I believe the term you are searching for is the following:


      Kind regards,


    • Pants Down says:

      If you think of the crypto coin world as the beginning of an entirely new financial system architecture it all makes a lot more sense.

      • d says:

        Cryptos have the potential to be a good alternative form of the currency.

        However none of the ones in existence at the moment have the sort of backing required to make them stable and give the security.

        Currently they are all flyby-night private operation’s.

  37. Gershon says:

    Bitcoin crashes $300. The fools who rushed in to buy at the peak will be soiling themselves about now.

  38. coinbait says:

    what will happen when the lights go out? remember, all you need is food and water.

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