back to article Crypto-cash exchange BitConnect pulls plug amid Bitcoin bloodbath

Amid a cryptocurrency price correction that has seen the price of Bitcoin drop by half from its mid-December peak, UK-based cyber-cash lending and exchange biz BitConnect said it is shutting down. The firm, dogged by accusations that it is a Ponzi scheme, cited bad press, regulatory orders, and cyber attacks for its market …

  1. FozzyBear Silver badge
    Mushroom

    Bubble meet pin.

    POP

    1. This post has been deleted by its author

      1. Anonymous Coward
        Anonymous Coward

        Re: there's plenty of evidence

        and there's plenty of evidence showing that they're simply whatever 2.0, with adoption accelerating every day

        I'm sure I've seen this argument before... TelexFree

      2. I ain't Spartacus Gold badge

        If cryptocurrencies are a bubble

        Crypto currencies are a bubble. Even if they were the best idea in the world, the massive zoom up in price over the last year shows that they're a bubble. Something that isn't even vaguely stable in price, is no use as a means of exchange.

        (and there's plenty of evidence showing that they're simply Banking 2.0, with adoption accelerating every day)

        Where? Is adoption increasing? Steam just pulled out of Bitcoin saying that transactions were taking an hour to process and costing $20. Reports I've read since suggest that's only got worse.

        Anyway Bitcoin isn't Banking 2.0. It might just possibly be transaction processing 2.0 - it isn't, but you can dream. But it doesn't even approach all the other services that banking provides. Banking is about liquidity transformation - turning short term savings into long term loans - everything else in banking is just database work and customer service.

        Bitcoin as investment looks to me to be killing Bitcoin as currency. Maybe after the inevitable price collapse it could go back to "normal", as it did after the last major collapse you mentioned.

        But it's still a piddling amount of money/transactions in the whole Bitcoin ecosystem, that it's failing to deal with. International banking deals with massively more transactions far more cheaply. It only costs £10 for an instant CHAPS transfer to buy your house in the UK, and same-day BACS (up to £20k I think) is free, as most are on free-banking, and business are only pay a few pence.

        it will take a hell of a lot more than the closure of a shady, two-bit British outfit to collapse something like Bitcoin.

        That's true. Though Bitcoin's history shows that most/all of its exchanges seem to be shady, and the ones that grow to be the biggest tend to go bust after a while (for various reasons). That's a huge problem if you're foolish enough to invest in Bitcoin, as you've got to find a trustworthy exchange to get your money out with. And come the inevitable collapse of the bubble, they'll probably start dropping like flies.

      3. phuzz Silver badge

        "and there's plenty of evidence showing that they're simply Banking 2.0"

        That doesn't mean it's not a bubble, or safe to invest in. In fact, looking at the current banking industry, it's a giant flashing warning not to have anything to do with it.

        (of course, I cashed out my BTC ages ago and made 10x what it cost me :)

        1. Anonymous Coward
          Anonymous Coward

          As did I. An investment of some computing time 7-8 years ago I think playing with the 'mining'. Cost, some really low amount of power (don't think my partner noticed :-) gains - PDG, didn't sell it at peak, but then it was higher than the current rate. It was a play thing that HMRC and my kids benefited from - pure chance no skill involved (other than getting the stuff to work on a multi processor G5 (told you it was a while)

    2. Anonymous Coward
      Anonymous Coward

      Lol. You cant pop a self healing bubble with a pin made of old world ideas.

      It amuses me to see the old way of finance struggling to incoporate something as high tech as crypto currency (in general, any one of them).

      If bitcoin fails it will be due to a technical issue that is solved by another coin and everyone moves onto that new coin. Whether a coin of any crypto curreny is worth $1 or $1000 is interesting yet ultimatley not that important.

      I'm not an expert on financial stuff. But I know enough that inventing money (i.e printing more banknotes when the going gets tough) and dealing with inflation plus other cons of fiat currency, really is a bit of a pain. If we are to transact across the internet and across geographical/political boundaries we need a system like blockchain implemented in something like bitcoin in order to do it.

      Perhaps in the furture 3D printers will become so versitle and fast as to be almost like replicators from star trek. The old economy will fight thisor try to regulate it to death to save their ideals from a new economy. Such an economy will have little use for any form of currency, even digital ones. If that future comes about, that will be the true death of something like bitcoin.

      "Bitcoin value drops" lol, means its cheaper to buy more because someone decided they wanted to sell some off for fiat. BUY BUY BUY

      1. I ain't Spartacus Gold badge

        Anon,

        Why do we need blockchain?

        Personally I suspect that Bitcoin is toast, because people will enentually move their transactions to other blockchain based stuff that scales better. And at the moment there's clearly a demand for it.

        However why blockchain? Why encumber all transactions with records of previous ones? The global payment transfer systems like SWIFT and VISA all work perfectly for moving money around the world. And are cheaper too. And don't waste vast amounts of electricity mining to do it.

        Criminals struggle to use that system - and they'll always find a way to move money. Their transaction costs have always been huge anyway. But with Paypal, credit cards and bank transfers all being so cheap, I don't see a huge use case for crypto currency.

        Blockchain looks like a much better system for keeping track of assets or software licenses.

        The thing the internet could do with is some sort of system for micropayments - but I don't see crypto currency being any better at that than the current system. Certainly not if it's got transaction fees you have to measure in dollars.

        As for your other points, the miners nearly control Bitcoin already. When it comes time to stop printing Bitcoin, if it survives that long, they'll vote to print more coins.

        1. DuncanLarge Bronze badge

          "However why blockchain? Why encumber all transactions with records of previous ones? "

          Its a method to mathematically prove that:

          1. You owned the "coins" and were thus able to transact them.

          2. The transaction was mathematically correct and valid.

          The blockchain can then be queried from the very beginning to validate all transactions. As long as you trust the first transactions then all future transactions can be confirmed as valid.

          With a bank however there is no such validation. You have to trus the bank, the peeps who work in them, the softare used by each bank involved and the validity of their databases. With a block chain it would be mathematically impossible to fiddle with transactions unlike in a bank.

          I have read of the land registry showing interest in blockchain. The chain would be thus validating transactions involving land ownership rather than "coins". In the current system it is possible to play about in ways that allow you to effectivley "steal" land. If you are in the right place in the current system you can become the owner of the new land, sure some people may detect this but a blockchain system would eliminate it as it would prove without a doubt that you never owned the land/were never going to be the new owner.

          It is important however to mention that a blockchain can only be as trustworthy as those who hold the majority of the hashing power that runs it. With crypto currencies that power does not lay with any one group. It's public and anyone can join in. There is still a danger however that a group of miners working together could get over 50% the hashing power. Should this happen, that group can dictate what is valid or not.

          1. I ain't Spartacus Gold badge

            Duncan Large,

            The Blockchain doesn't prove that you owned the coins. It proves that you had access to the wallet for however brief a period. As various Bitcoin related scams have shown.

            I admit it gives more security on the transaction. But it still won't save you from mis-typing the amount you're paying. Bank errors do happen, but not all that often, and I don't buy blockchain stopping that. Or saving you from fraud. Yes it does require a trusted middle-man (such as the current payment processors in the banking system) - but it also requires a lot more security savvy and embuggerance for the users - so the risk you save by using blockchain over third party banks, you lose in having to secure your wallet / wallets.

            I just don't see crypto-currency solving any current problems other than, "how do I transfer money untaxed and hidden from the police".

            I agree that blockchain may well turn out useful for the Land Registry. Or software licences.

            A use the Bank of England are looking at I think is loan collaterol. Say a bank wants to borrow £1m from the BofE or another bank on the inter-bank loan market - they currently would pledge another asset as collaterol against the loan (this would be a government or corporate bond or other security). This is what's always happened. They've looked at a system to run this. Then both banks (and regulators) would be able to know how much uncommitted capital the banks have at any one time.

          2. hellwig Silver badge

            The blockchain can then be queried from the very beginning to validate all transactions. As long as you trust the first transactions then all future transactions can be confirmed as valid.

            Unless you fork the blockchain, then you can create your own truth. Bitcash is exactly that. So WHOSE blockchain do you trust when there are thousands of them?

        2. scrubber
          WTF?

          SWIFT is good???

          Some of these cryptos allow more TPS than PayPal, they settle in seconds, cost fractions of a penny and have complete visibility. They also come pre-mined so use no more electricity than a dozen idle servers.

          Cryptos are not a panacea and blockchain is not the correct solution to every problem, but to even remotely consider that the current international banking system is close to good enough then you're not talking to anyone trading outside Europe.

        3. This post has been deleted by its author

  2. Sorry that handle is already taken. Silver badge

    Play stupid games...

    ...you know the rest.

  3. Anonymous Coward
    Anonymous Coward

    Those US letters look pretty damning

    When and Where are the principals going to face trial for Fraud ?

  4. Anonymous Coward
    Anonymous Coward

    How do you make a small fortune in bitcoin?

    Invest a large fortune.

    Credit goes to Reddit for that one.

    1. EnviableOne Bronze badge

      I think freddie laker said it about airlines in the 80s

      1. asdf Silver badge

        Yeah that quote is at least that old if not older.

  5. Anonymous Coward
    Anonymous Coward

    Hodl o-on loosely...

    "...Joerg von Minckwitz, CEO of blockchain payment service Bitwala, urged Bitcoin fans to "HODL on!" – a typo for "hold" that has become part of the vernacular among cryptocurrency fans."

    What, in less than a day? Just how desperate are these people?

    1. Sorry that handle is already taken. Silver badge

      Re: Hodl o-on loosely...

      It's been around for a few years.

      1. I ain't Spartacus Gold badge

        Re: Hodl o-on loosely...

        You're right. I just looked it up. Remember Glenn Hodl?

        1. BongoJoe

          Re: Hodl o-on loosely...

          Yes, in a past life in which I had clearly done something awful...

  6. amanfromMars 1 Silver badge

    The Value to be Realised in Bitcoin is in the Use to which IT is Put by an Unimpeachable Few?

    The RAT in your midsts for abandoning sinking ships/collapsing industrial scale printed fiat currencies.

    amanfromMars Jan 17, 2018 12:50 PM [1810171750] ..... offering alternate freely available views on Advanced IntelAIgent Programming with the following here, ... https://www.zerohedge.com/comment/11014482#comment-11014482

    “Having no clear fundamental value and largely unregulated markets, coupled with a storyline conducive to delusions of grandeur, makes this more than anything we can find in the history books the very essence of a bubble,” he wrote.

    It is only sub-prime marketeers and intellectually challenged established puppeteers/privateers/pirates who would wish such delusions of grandeur as they imagine to be true, to be true, for whenever they are not are their choke-holds on systems with cuckolds at the levers of invention and asset appreciation, rendered useless and unnecessary and become easily circumvented and replaced with Other Advanced IntelAIgent Drivers Energising the Virtualised Fields of SMARTR Novel Play.

    And whenever Fiat in all and/or any of its paper forms does not invest of its banked assets in Command and Control of Future NEUKlearer HyperRadioProACTive IT PreProgramming Projects, is Bitcoin always going to be a Perfectly Stealthy Vehicle for Recognising Success in Delivery of Grand FuturistICQ Designs for Augmented and Segmented Virtual Realisation with Myriad Mass Multi-Media Presentations ........ with AIMMORPGames to Boot, Monitor and Mentor with SMARTR ESPecial Drivers from Surreal Sources/Immaculate Bounty/Heavenly Reward.

    And this is revealing of the systemic problem for which there is no real simple solution. ..... http://demonocracy.info .... other than flash crash and collapse into the Arms of AI and Virtual CHAOS ...... Clouds Hosting Advanced Operating Systems.

    Or are you stupid enough to not thoroughly think internetworking things through to inevitable ends, and strangely believe that the current architects and present suppliers of all of your woes have the fundamental answers to right the wrongs they are administering? Can you not realise/Have you not realised they haven't a clue about what next to do fix what they are fcuking up so badly?

    When such as the above is the true reality of your predicament are you in dire straits need of a Radically Different Help, which for some who would be more than just a few and the many, would/could be likened akin to Alien Assistance, given from where help is coming.

  7. Tromos
    Joke

    Lost a packet of cryptocurrency?

    You're not hodling it right.

  8. wolfetone Silver badge

    It's only until you see and understand how financial markets have worked since the Nixon Shock in the 70's, will you then begin to realise that all finance is corrupt and shady. Bitcoin is just another name for the Dollar.

    1. Doctor Syntax Silver badge

      "Bitcoin is just another name for the Dollar."

      If it were then its value would remain static against the dollar.

      1. wolfetone Silver badge

        "It's only until you see and understand how financial markets have worked since the Nixon Shock in the 70's, will you then begin to realise that all finance is corrupt and shady."

        I like how you neglected this part.

        The book "And The Weak Suffer What They Must" is a fantastic description, from a European point of view, on the creation of the EU we have today. Those who disagree with what I said would do well to read this and then read my comment again.

        I'll wait.

        1. I ain't Spartacus Gold badge

          wolfetone,

          Is that Varoufakis' book? Might be an interesting read, but isn't he talking about the Euro and the EU - and the problems with them? Rather than Bitcoin. And I don't see how Bitcoin is the dollar even makes sense.

          Also, there's an IT angle. Varoufakis used to be chief economist for Valve.

          1. wolfetone Silver badge

            "Is that Varoufakis' book? Might be an interesting read, but isn't he talking about the Euro and the EU - and the problems with them? Rather than Bitcoin. And I don't see how Bitcoin is the dollar even makes sense.

            Also, there's an IT angle. Varoufakis used to be chief economist for Valve."

            The very same.

            For the most part it is generally about the EU. But it's the formation of the EU and economic impacts behind the formation which are interesting, and enforce what I was getting at before.

            The "bitcoin is the next dollar" is in reference to the Nixon Shock which occured in the 70's. In very simplistic terms, the dollar isn't backed by anything. Just good will and faith of other countries. After WW2, the Bretton Woods system pegged the dollar against gold, but once gold values started to rise the USA were still forced to sell it at $35. Nixon pulled the dollar away from gold. Since then the dollar, really, hasn't been backed by anything tangible, the same as every other currency in the world. So when people bemoan bitcoin for being worthless or a bubble, they don't understand how their own currencies work. Every currency in the world is a fiat currency, faith based.

            If someone in the UK decided that America wasn't strong economically as they thought they should be, they'd "sell" their dollars. This devalues the dollar, as everyone else see's that and thinks "crikey, the dollar must be on it's arse. Best sell what I have". The dollar slumps due to this contagion of the weakening of the faith in the currency.

            At the very core of the matter, all currency is worthless. If both you and I decided that a bottlecap is worth a bottle of beer, I could pay you a bottlecap and get a beer back. People outside of our agreement would see that and think the bottlecap is worthless and you're stupid for selling it. But to us its a currency. That's what has happened all over history. From the swapping of hides for food through to brass coins instead of hides.

            To finish, the book is very, very good. Hard to understand sometimes so may need another read. But I must say, as someone who voted to remain in the EU, I'm half glad the UK is leaving now. That'll make sense when you read the book.

            1. I ain't Spartacus Gold badge

              wolfetone,

              I moved from being a grudging remainer because leaving was too risky to deciding to vote leave on the day the ECB deliberately crashed the Greek banking system. Varoufakis is an interesting guy, although I suspect I'd probably only agree with about 5% of his book.

              I didn't understand that was what you meant by your Bitcoin / dollar comparison.

              I think you're totally wrong though. There is a huge difference. Firstly what's the gold standard worth anyway? Sure a currency is pegged to gold, but what's gold pegged to? It's an artificial left-over from the days when gold was currency, and then it was backed by nothing - other than the fact people wanted it.

              The dollar is backed by the fact that people want it. If I have dollars, I can buy stuff from the USA. Dollars will always be valuable to Americans, as they have to pay their taxes in dollars. Therefore the value of the dollar will always fluctuate, but so long as the US economy is reasonably strong, my dollar is worth a relatively predictable amount. Should the US economy do a Zimbabwe/Venezuela, then the whole global economy is totally fucked anyway - and gold's no use to me either. That's when your currency becomes tinned food and shotgun shells.

              Bitcoin is backed by nothing because there is no reason for anyone to want Bitcoin. I mean obviously there is today, and certainly tomorrow, and very probably next week. But what about next year? Can you guarantee that Bitcoin will still exist next year? Short of nuclear armageddon, the US still will. If I hold a dollar now, it'll get me something close to a dollar's value this time next year. By that time Bitcoin may have crashed, and all the users moved to Etherium or somesuch.

              That's what people mean when they say Bitcoin isn't backed by anything. There's not much of a Bitcoin economy, and a lot of what there is, is criminals. I know there are legitimate users. But with transaction fees at $20 - I can see a lot of those users jumping ship. Some already are. The "investors" want it to stay valuable, but that only works in the long term if people keep using it. And the only reason the investors have manged to bid the price up so high, is that so few people use Bitcoin. So there are so few transactions between it and real currencies, that buying a few thousand dollars worth, can materially affect the price. So many people want, need and use dollars on a daily basis, that you can buy millions of dollars and have no price effect whatsoever. Sell a million dollars, nobody cares. Sell $1m of Bitcoin, the price will crash.

  9. theninehertz

    Mid December bitcoin Cryptocurrency decreases. There are some reasons falling down

    1. Regulatory orders, and cyber attacks, bitcoin stolen & hacked

    2. US financial watchdogs

    3. China Closed Bitcoin Exchanges, Prices Rallied Three-Fold 313%

  10. Anonymous Coward
    Anonymous Coward

    Looking forward to the complete collapse of crypto-currencies

    Because:

    - 1 it is inevitable

    -2 I'm waiting for the price of GTX 1080 ti to drop before updating my gaming rig. And all those mining people are keeping it high

    1. Boris the Cockroach Silver badge
      Unhappy

      Re: Looking forward to the complete collapse of crypto-currencies

      I'm another waiting for the bitcoin 'mining' shit to stop because I too want a 1080ti but cant afford the 750 quid it will cost.

      Especially when I'll have 150 quid left for the rest of the pc at that price

      1. I ain't Spartacus Gold badge

        Re: Looking forward to the complete collapse of crypto-currencies

        I thought the mining had moved beyond graphics cards and into ASICs nowadays?

        So are you sure it isn't the evil supercomputer people that are now making your gaming more expensive nowadays?

  11. I ain't Spartacus Gold badge

    Scam alert

    BitConnect promised patrons the ability to earn interest on Bitcoins by lending them.

    This is a scam. They might be a perfectly legitimate exchange, but anyone offering to borrow or lend in Bitcoin is a scammer.

    The thing that the Bitcoin fans used to go on about in the good old days, before it turned into this mad bubble recently, was inflation. It was where the gold-bugs all went, after the gold price collapsed. There couldn't be inflation in bitcoin due to limited numbers allowed, corrupt governments, evil banks, etc. etc. etc...

    So Bitcoin has deflation built in. At the moment it's in hyper-deflation. Inflation is where the value of money falls, hyper-inflation I think is defined as when that's by more than 50% a year. Deflation is when the value of money rises.

    Why's this a bad thing? Well I'm going to use one example, lending. It's awful for other reasons too, but without lending you can't have investment. Without investment, you don't get productivity growth. Without productivity growth, you don't get richer - you just move the same resources round amongst your population. Growth then only comes from having more people.

    If there's 100% inflation, that's bad for the economy. But I can still invest. If I borrow £1m for a year to upgrade a factory - then I've obviously got to cover the interest - but in a year's time I'm only going to owe the equivalent of half that. It would now cost £2m to buy that same machinery, but I only owe £1m to the bank. Obviously this means they'll be charging me high interest, but then the price of the goods I'm selling is also doubling every year. This is still bad for the economy, but the point scales down to 5% inflation - I just did it to make the numbers easier. And it explains why developing countries can cope with inflation of 10-20% and still grow.

    With 100% deflation - it all goes horrible. I buy a machine for £1m. After a year I can now buy that same machine for £500k! But I still owe the bank £1m! Disaster! Obviously they can't charge me much interest, or I'd be going bust. Worse lets say I was planning to sell 1m gewgaws a year, made with this machine, at £1 each. By year 2, I'm deflation means I can only sell them for 50p each. That money still buys me the same stuff, so it would be fine. Except I had to borrow the year before when money was half as valuable - so I'm screwed and will never be able to pay back my debt. I don't believe there's every been hyper-deflation before, becasue it causes economic collapse at even low levels. So congratulations to Bitcoin for that...

    Anyway my point here is that the gold-bugs are wrong. Deflation is awful. Inflation at low levels is fine, at high levels it's bad, but not as catastrophic as deflation. And deflation destroys banking. So anyone claiming to do Bitcoin banking (rather than just doing money transfers) is an idiot or a fraudster.

  12. Pete4000uk

    Am I the only one

    Who has no idea what this mining for a coin or whatever is about?

    Besides, anything that bypasses the established monitery system is bound to get banned or whatever

  13. Blotto Bronze badge

    HODL = Hold On for Dear Life

    HODL = Hold On for Dear Life

    meaning keep hold of your coins/shares regardless of the ups or downs in the price.

    1. Sorry that handle is already taken. Silver badge

      Re: HODL = Hold On for Dear Life

      A backronym; it was originally a typo.

  14. BebopWeBop Silver badge
    Facepalm

    To use a much overused (but still apposite) analogy, it looks like a duck, it walks like a duck, it quacks like a duck (in bad camouflage)

  15. a_yank_lurker Silver badge

    Point of Money

    The point of money is to provide an easy medium of exchange for time worked and cost of goods eliminating the need for a barter system. Whether is it gold coins, paper backed by gold, just paper, or a cryptocurrency, it must be an easy to use medium of exchange. It should be relatively stable medium over time to be effective; the price now is going to be about the same next week or next month.

    Do crytpocurrencies function as effective exchange media?

  16. BongoJoe

    Question

    Is it still not a bubble?

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