Peter Cooper thinks many investors are blinkered to the risks associated with digital coin investments. Jack Guez / AFP
Peter Cooper thinks many investors are blinkered to the risks associated with digital coin investments. Jack Guez / AFP
Peter Cooper thinks many investors are blinkered to the risks associated with digital coin investments. Jack Guez / AFP
Peter Cooper thinks many investors are blinkered to the risks associated with digital coin investments. Jack Guez / AFP

Beware of the great cryptocurrency con


  • English
  • Arabic

When Warren Buffett met Katy Perry last month, apparently the main thing she wanted to ask the world’s greatest living investor was his opinion about Bitcoin.

No doubt he stuck to what he said about the cryptocurrency three years ago: “The idea that it has some huge intrinsic value is just a joke."

Back then he explained it was just an anonymous money order or check to transfer money. But since that time Bitcoin and its 1,500 plus "me-too" cryptocurrencies have become possibly the biggest speculative bubble in history, big enough even to interest a pop star.

What on Earth happened?

As I wrote in this column last summer it is a matter of historic fact that whenever conditions of excessive liquidity prevail - like the ultra-low interest rates we have been enjoying - then a speculative investment bubble will emerge to suck up this liquidity.

Before Bitcoin we had the dot-com stocks that boomed in the late 90s - making a few early sellers very rich - and then crashed, losing a lot of money for everybody else.

This has been happening for centuries. Tulips in 16th century Holland were possibly the first such speculative mania.

I first heard about Bitcoin at an investment conference in Vancouver in 2010 from a young guy called Joel Bowman, who used to work in Dubai as a journalist.

One of his former colleagues told me he now lives in Fiji having made millions as an early Bitcoin miner. That's my Bitcoin millionaire story, a guy who once used to envy my own modest success in the Dubai dot-com world.

But as we all know from the dot-com days, this does not end well for everybody. The early pioneers who sell out at the right time do well; for the latecomers to the party it is a completely different story.

Imagine for example, you woke up one morning last December and thought: "I’m going to do it, I will buy Bitcoin", so you paid out almost $20,000 per coin.

That now looks to have been the top of the market, a classic price spike, signaling the end of a trend, although admittedly it went on longer and got far higher than most thought possible - about 20-fold last year, that’s a record breaker for an asset price bubble. Then things went wrong.

By the end of January you had lost around half your money, and by the middle of February you hit what so far looks to have been the bottom at $6,000.

Then somebody posted a story, which never appeared to be validated, that a major investor was putting $400 million into Bitcoin and prices started to rise again.

________

Read more:

'It was fun but I would never do it again’: UAE Bitcoin investors confess

Bitcar - a cryptocurrency that allows you to own an exotic car

Don't bank on cryptocurrencies as the hot tip for the year

What Bitcoin can teach us about meaningful investing

________

Bitcoin did indeed do a classic "dead cat bounce" back to $12,000, and then it began to tumble again last week before picking up again.

Ready for another roller coaster ride? Be careful it could get very rough from here; a broken investment price spike is almost impossible to repair as confidence will never be as high as before it happened.

Nouriel Roubini, the professor who correctly called the US subprime lending crisis in 2006, recently said Bitcoin has an intrinsic value of zero, just as the most successful investor alive, Mr Buffett, did three years ago.

There have been plenty of warnings. I came across a transcript of remarks by Mr Buffett's 94-year old business partner Charlie Munger, from the Daily Journal's annual meeting last month.

He said: "Well you’re of course right to suspect that I regard the Bitcoin craze as totally asinine. To create some manufactured currency … A different payment system could happen like WeChat in China.  It’s a better payment system than the one we have in America.  So something like that could happen.

"But Bitcoin where they’re creating an alternative to gold … and then make a big speculative vehicle? … I never considered for one second having anything to do with it. I detested it the moment it was raised, and the more popular it got, the more I hated it. On the other hand, I expect the world to do insane things from time to time."

Indeed, it is impossible to find an older, serious commentator anywhere in the world with a good word to say about Bitcoin and the cryptocurrencies. That in itself ought to be a huge red-letter warning to any potential investor.

Mr Munger is right about the pseudoscience of Bitcoin. It stinks. Blockchain technology is nothing like the worldwide web.

Mr Roubini correctly points out that blockchain has been around for 10 years and the only application anybody has found for it is in creating cryptocurrencies. It’s commonplace to nod to the blockchain as the future, but it is a completely false god.

Just look at the huge amount of energy blockchain takes to create a single Bitcoin; annually Bitcoin production currently consumes enough electricity to power Iceland. Imagine if it was powering health records worldwide.

Cryptocurrencies are simply a series of old-fashioned pyramid investment or Ponzi schemes, each being assiduously promoted and manipulated so that the founders make a fortune and pretty much everybody else is a loser.

It’s a totally unregulated $700 billion market, and a gold mine for financial conmen with a tech qualification, most of them located in China and South Korea.

That’s why Bank of America’s wealth management arm Merrill Lynch has banned its 17,000 financial advisers from buying Bitcoin-related investments for clients. It also won’t allow clients to buy cryptocurrencies on their credit cards.

Goldman Sachs is telling clients it expects most cryptocurrencies to go to zero. The world’s largest asset manager, BlackRock says holders should be ready to "stomach complete loss".

Last week, the US Securities and Exchange Commission announced it is investigating the cryptocurrency initial coin offerings market and has issued "scores of subpoenas".

This is not another dot-com technological revolution, it’s a pure speculative mania whose bubble has, almost certainly, already burst. Caveat emptor, buyers beware.

Peter Cooper has been writing about finance in the Gulf for more than 20 years

WHAT IS GRAPHENE?

It was discovered in 2004, when Russian-born Manchester scientists Andrei Geim and Kostya Novoselov were experimenting with sticky tape and graphite, the material used as lead in pencils.

Placing the tape on the graphite and peeling it, they managed to rip off thin flakes of carbon. In the beginning they got flakes consisting of many layers of graphene. But when they repeated the process many times, the flakes got thinner.

By separating the graphite fragments repeatedly, they managed to create flakes that were just one atom thick. Their experiment led to graphene being isolated for the very first time.

In 2010, Geim and Novoselov were awarded the Nobel Prize for Physics. 

Juliot Vinolia’s checklist for adopting alternate-day fasting

-      Don’t do it more than once in three days

-      Don’t go under 700 calories on fasting days

-      Ensure there is sufficient water intake, as the body can go in dehydration mode

-      Ensure there is enough roughage (fibre) in the food on fasting days as well

-      Do not binge on processed or fatty foods on non-fasting days

-      Complement fasting with plant-based foods, fruits, vegetables, seafood. Cut out processed meats and processed carbohydrates

-      Manage your sleep

-      People with existing gastric or mental health issues should avoid fasting

-      Do not fast for prolonged periods without supervision by a qualified expert

Famous left-handers

- Marie Curie

- Jimi Hendrix

- Leonardo Di Vinci

- David Bowie

- Paul McCartney

- Albert Einstein

- Jack the Ripper

- Barack Obama

- Helen Keller

- Joan of Arc

AUSTRALIA SQUAD

Aaron Finch (captain), Ashton Agar, Alex Carey, Pat Cummins, Glenn Maxwell, Ben McDermott, Kane Richardson, Steve Smith, Billy Stanlake, Mitchell Starc, Ashton Turner, Andrew Tye, David Warner, Adam Zampa

Company name: Play:Date

Launched: March 2017 on UAE Mother’s Day

Founder: Shamim Kassibawi

Based: Dubai with operations in the UAE and US

Sector: Tech 

Size: 20 employees

Stage of funding: Seed

Investors: Three founders (two silent co-founders) and one venture capital fund

Key facilities
  • Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
  • Premier League-standard football pitch
  • 400m Olympic running track
  • NBA-spec basketball court with auditorium
  • 600-seat auditorium
  • Spaces for historical and cultural exploration
  • An elevated football field that doubles as a helipad
  • Specialist robotics and science laboratories
  • AR and VR-enabled learning centres
  • Disruption Lab and Research Centre for developing entrepreneurial skills
The National's picks

4.35pm: Tilal Al Khalediah
5.10pm: Continous
5.45pm: Raging Torrent
6.20pm: West Acre
7pm: Flood Zone
7.40pm: Straight No Chaser
8.15pm: Romantic Warrior
8.50pm: Calandogan
9.30pm: Forever Young

Nancy 9 (Hassa Beek)

Nancy Ajram

(In2Musica)

Infiniti QX80 specs

Engine: twin-turbocharged 3.5-liter V6

Power: 450hp

Torque: 700Nm

Price: From Dh450,000, Autograph model from Dh510,000

Available: Now

UAE currency: the story behind the money in your pockets
The five pillars of Islam

1. Fasting 

2. Prayer 

3. Hajj 

4. Shahada 

5. Zakat 

The 100 Best Novels in Translation
Boyd Tonkin, Galileo Press

Who has been sanctioned?

Daniella Weiss and Nachala
Described as 'the grandmother of the settler movement', she has encouraged the expansion of settlements for decades. The 79 year old leads radical settler movement Nachala, whose aim is for Israel to annex Gaza and the occupied West Bank, where it helps settlers built outposts.

Harel Libi & Libi Construction and Infrastructure
Libi has been involved in threatening and perpetuating acts of aggression and violence against Palestinians. His firm has provided logistical and financial support for the establishment of illegal outposts.

Zohar Sabah
Runs a settler outpost named Zohar’s Farm and has previously faced charges of violence against Palestinians. He was indicted by Israel’s State Attorney’s Office in September for allegedly participating in a violent attack against Palestinians and activists in the West Bank village of Muarrajat.

Coco’s Farm and Neria’s Farm
These are illegal outposts in the West Bank, which are at the vanguard of the settler movement. According to the UK, they are associated with people who have been involved in enabling, inciting, promoting or providing support for activities that amount to “serious abuse”.

Electoral College Victory

Trump has so far secured 295 Electoral College votes, according to the Associated Press, exceeding the 270 needed to win. Only Nevada and Arizona remain to be called, and both swing states are leaning Republican. Trump swept all five remaining swing states, North Carolina, Georgia, Pennsylvania, Michigan and Wisconsin, sealing his path to victory and giving him a strong mandate. 

 

Popular Vote Tally

The count is ongoing, but Trump currently leads with nearly 51 per cent of the popular vote to Harris’s 47.6 per cent. Trump has over 72.2 million votes, while Harris trails with approximately 67.4 million.