Bitcoin is more broadly accepted than ever, but that doesn't mean it's not still a scam. Credit: George Peters / Getty Images Bitcoin is more popular than ever. Businesses such as AT&T, Microsoft, Visa, and PayPal all accept payment by Bitcoin and even small companies are getting into cryptocurrency. According to an HSB survey, one-third of US small and medium-sized businesses accept cryptocurrency as payment. If you invest in Bitcoin, I’m sure this is great news. To me, it’s more proof that a sucker’s born every minute. Why the Bitcoin hate? Because it’s a con — always has been, always will be. Oh, it sounds good enough. Bitcoin is a decentralized digital currency that you can buy, sell, and exchange directly via blockchain-secured ledgers, instead of relying on an intermediary such as a bank with fiat currency. It uses cryptographic proof instead of trust in a government. Like fiat money, though, at day’s end, its value is in the eyes of its owners. So, what’s wrong with that? As Robert McCauley, a non-resident senior fellow at Boston University’s Global Development Policy Center, recently explained, comparing Bitcoin to a Ponzi scheme is being too kind to Ponzi schemes. True, unlike Ponzi or Bernie Madoff, “Bitcoin is bought not as an income-earning asset but rather as a zero-coupon perpetual.” In other words, no one promises you a return for holding Bitcoin, its value comes from selling Bitcoins to others. But what happens the day that no one buys Bitcoins at any price? There is no bottom. Bitcoin could become valueless overnight, As McCauley explains, the Bitcoin endgame wouldn’t be like Madoff’s, but instead would look more like “a penny-stock pump-and-dump scheme more than a Ponzi scheme. In a pump-and-dump scheme, traders acquire basically worthless stock, talk it up and perhaps trade it among themselves at rising prices before unloading it on to those drawn in by the chatter and the price action. Like the pump-and-dump scheme, Bitcoin taps into the pure desire for capital gains. Buyers cannot stand the sight of friends getting rich overnight: they suffer an acute fear of missing out (FOMO).” Does that sound familiar? If you invest in Bitcoin, it should. Bitcoin’s value depends entirely on hype and hope. Lose those and it loses its value. The cryptocurrency has been hit by many crashes, most recently in November, when it dropped to less than half its value. As I write this, it’s back up again, but how long will that last? Will it ever reach its all-time high of $68,991? Who knows? What I do know is that as with any money scam, if you’re in early and get out, you’ll make money. For Bitcoin, if you invested in 2017 or earlier, congratulations, if you got out, or get out soon, you’ll make “real” money. After 2017? Not so much. It was never meant to be this way. Satoshi Nakamoto, the mysterious Bitcoin inventor, meant it as a medium for daily transactions and a way to circumvent traditional banking infrastructure after the 2007-08 financial collapse. That’s not how it’s worked out. Today, while you can use Bitcoin for purchases, its real use is a high-risk, high-reward investment gamble. If that’s all there was to it, I wouldn’t mind that much. People bet on the Super Bowl, horses, poker, so why not Bitcoin? I dislike Bitcoin because it enables cybercrime. Without Bitcoin and other cryptocurrencies, there would be less ransomware. They’ve made it possible to hide huge ransoms in the ironically named public ledgers. Just shuffle the payments around Bitcoin wallets and there’s almost no chance the crooks will ever get caught. In addition, a great deal of today’s malware is Bitcoin-mining software. “Cryptojacking” has become today’s hot new malware. So, I guess there is another way to make money from Bitcoin: Be a criminal. Bitcoin also eats power like nothing else on Earth. Mining Bitcoin consumes about 91 terawatt-hours of electricity annually. That’s more than Argentina, a nation with 45 million people, uses in a year. And Bitcoin’s energy consumption only grows larger every day. That’s in part because the fantasy that you can successfully mine Bitcoin from home hasn’t been true in years. To mine a Bitcoin Proof of Work (PoW) successfully, high-powered graphics processing units (GPUs) won’t do the trick anymore. You need computers loaded with application-specific integrated circuits (ASICs). These are expensive setups with hundreds to tens of thousands of dedicated computers running 24/7. It’s very telling that a recent study found that 0.1% of Bitcoin miners control half of all mining capacity. Remember what I said earlier about the only people who really make money are the ones who were there early? Simultaneously, mining rigs have driven up GPU prices, This has led to such market oddities as Playstations and gaming consoles being in short supply thanks to all the high-powered processors being grabbed up by miners. Finally, as my buddy David Gewirtz points out, you can lose your shirt with Bitcoin. In the long run, I expect all but a few to lose their shirts to Bitcoins and other cryptocurrencies. I know that’s not a popular view, but seriously people, take a deep breath if you’re already into cryptocurrency and think about what I’ve said. It might just save you a ton of real money. Related content opinion GenAI is to data visibility what absolute zero is to a hot summer day Given the plethora of privacy rules already in place in Europe, how are companies with shiny, new, not-understood genAI tools supposed to comply? (Hint: they can’t.) By Evan Schuman May 06, 2024 6 mins Data Privacy GDPR Generative AI news How many jobs are available in technology in the US? 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