« I strengthened you so that you might go and bear fruit, fruit that will last » (John 15,16)
Investing your savings in cryptos is even worse than burying them in your garden. Not only does it bear no fruit, but it is also squandered, consumed to heat factories that heat no one and produce nothing.
Are cryptos the goose that lays the golden eggs? Where are the eggs? The goose consumes a lot of energy (the equivalent of several nuclear power plants) and produces nothing, not a single egg, neither golden nor ordinary, not even enough to make an omelette.
How can a company that produces nothing pay dividends to its shareholders? The technique is very easy: you just need to issue new shares and pay the old shareholders the money transferred by the new ones. The company can last as long as there are new buyers for its new shares.
Can we reap without having sown?
It is a civic duty to denounce cryptos, because they are a scam. Savers should be warned, because they don't know that by buying cryptos, they are not investing their money, they are just paying for the winnings of a stupid gambling game. Crypto buyers are betting on the coming of fools, so fools they want to pay the scammers' winnings.
Generally crypto buyers are gullible. They do not know that they are betting on the arrival of new bettors who agree to pay the winnings of old bettors who withdraw from the game. If they are warned that they are betting on the increase of this foolishness, it can cause the foolishness to decrease, and those who have bet on the increase of the foolishness will have lost their bet.
If bitcoin buyers are not warned that they are betting on a stupid gambling game (paying the winnings of previous bettors, who withdraw, to have the right to bet on the arrival of new payers) they are victims of bitcoin promoters. But if they are warned, they are nothing but fools who will go broke (or maybe sometimes win) on stupid gambling.
Crypto buyers, you enrich the crooks. Crypto sellers, you are crooks and you incite fools to become crooks in turn. Crypto proponents, you deserve jail time, because you have ruined savers for a trillion dollars.
Cryptos are like a sports bet, except it's about betting on the victory of scammers. When you buy cryptos, you pay to have the right to become a seller of cryptos, therefore a scammer. The gains of cryptos depend on the arrival of new buyers, therefore on the arrival of new scammers. To bet on cryptos is to bet on the will of human beings to become crooks.
Cryptos are a gigantic scam based on lies and illusions. Savers are made to believe that cryptos are an investment, the greatest invention since aviation, that they will make us prosper or that their value is similar to that of gold coins. But all of this is false. Cryptos are not real wealth, just tickets to a lottery where almost all bettors will lose everything they wagered, while wasting gigantic amounts of electrical energy and digital resources.
The blockchain is nothing more than a periodically updated ledger. The invention of cryptos is nothing but the invention of a ledger to fuel speculation. Is it an important discovery?
Cryptos are lottery tickets. Bettors can try to touch their winnings at any time, by reselling their cryptos. If they keep their cryptos, it amounts to keeping lottery tickets for the following draws. Earnings depend on the existence of new buyers who must pay the earnings of previous buyers. If no buyer shows up, the price of a crypto drops to zero and the win is zero, the bet is lost. The holders of cryptos are therefore bettors who play a lottery whose winnings are paid by the continual arrival of new bettors, who agree to pay the winnings of previous bettors, who withdraw from the game. It is a question of betting on the existence of new punters stupid enough to pay the winnings of old punters who want to withdraw. If there are no more new bettors, there are no more winnings and all the old bettors have lost everything. Crypto promoters entice new bettors, without warning them, to pay the winnings of old bettors. It is not an investment but only a very dangerous game of money. It's also the perpetuation of a scam, because every new victim potentially becomes a new scammer, if new victims show up. To buy cryptos is to be a moron who bets on the arrival of new morons like him. If there are no more new morons, the moron loses all his money. Is it a good bet? Is it an investment? Is this a good way to save?
If people realize that cryptos are a scam, they will stop buying them and their price will drop to zero. Hundreds of billions of dollars in bitcoins will disappear at the same time. How is it possible ? How can hundreds of billions of dollars disappear with the snap of a finger? Because bitcoins are not real wealth. But where have the hundreds of billions of dollars in bitcoins invested by savers gone? They will have been used to pay the energy bill, the construction of factories and the computers that produced the bitcoins, and all the winners who withdrew from the game in time, reselling their bitcoins with a profit. The money earned by the winners so far has already been banked. They are no longer in danger of losing it. It was paid for by today's bitcoin holders, who will lose all their savings unless they find new victims of this scam, who will pay for previous bettors' winnings and for wasted energy. It is therefore a scam where the victims pay to have the right to be crooks, hoping to find new victims, who in turn will agree to pay to be crooks and so on. On the door of the crypto empire one could write: Saver, you who enter here, renounce all hope. When you buy cryptos, you can only be defrauded and in turn defraud new victims. Selling cryptos should be banned, because selling cryptos is defrauding buyers. Crypto buyers dream of getting rich through scams. To make money, they must find victims who will agree to pay a high price for lottery tickets that are worth nothing. So crypto buyers are no better than scammers. They dream of getting rich without working, without producing wealth, only by cheating fools.
Ads that featured gold coins with the bitcoin logo were misleading. A naïve buyer might believe they are buying gold or durable wealth comparable to precious metals. But it is false. A buyer of cryptos buys nothing, except the right to resell this nothing that he has bought.
Cryptos are created to pay those who update the ledgers of all crypto transactions. This update is expensive (more than 60 dollars for a single bitcoin transaction, in April 2023) and generally consumes a lot of electrical energy, more than 700 kWh (Wikipedia). Imagine a bank charging $60 per transaction to maintain its customers' accounts while consuming 700 kWh each time it records a transaction. Would it be a great invention that prepares us for a great future? As soon as a price is higher than twice the average price, we are entitled to speak of a scam. How many times the average price of bookkeeping work are bitcoin producers paid?
700 kWh of electrical energy is more than the average family needs for a month, if they want to benefit from modern comforts.1 liter of Diesel can produce approximately 3kWh of electrical energy. The body of an adult human being consumes about 2kWh per day, which we find in our food. 1kg of sugar contains 17MJ (5kWh) of available energy, 1kg of potatoes 3.2MJ. 1kWh=3.6MJ. The kWh in staple food is comparable to the kWh of electrical energy, because it takes about as much agricultural resource to produce one as to produce the other. A transaction in bitcoin consumes about as much energy as that contained in the food of an adult human being for a year. Give us today our daily bread, and also give me 365 breads to make a bitcoin transaction. Energy is a precious commodity. It is a matter of life or death for each of us and for all of humanity. Every citizen of the planet has a duty to use their intelligence to avoid wasting energy, as a consumer and as a producer. While we teach children to turn off the light in an unoccupied room, to save a few Wh, a crypto buyer consumes hundreds of thousands of Wh for a single transaction.
The average number of transactions in the bitcoin market is 4 per second. It's comparable to a few thousand people in a shopping mall. Why do a few thousand people consume as much electricity as tens of millions? Why supply so much electricity to this small market? Where does this monstrous nonsense come from?
The value of a durable good depends on the services it can render. The fair price of cryptos is therefore equal to zero, since they are false goods that render no service. Any sale of cryptos above the fair price, equal to zero, is a scam. Wealth in cryptos (about 1000 billion dollars) is false, purely illusory. Crypto owners have no real wealth. Crypto buyers believe they are getting richer when in truth they are getting poorer, because they are giving up a real wealth for a fake one. Matt Damon wanted us to believe that our future is to live on an illusion of enrichment without producing any wealth.
Cryptos do not deserve to be called cryptocurrencies. They are counterfeit money. The value of counterfeit money depends on the existence of people who accept it without knowing that it is counterfeit. The crypto system exists because people agree to be paid in counterfeit money and because they speculate on its rising value. Why do people want cryptos when in truth it is worth nothing. It's a story of market value. Market value is not real value, it is only the value of what people are willing to pay to buy. A bogus good that has no real value can have a great market value provided there are people stupid enough to buy it.
Objections and answers:
Real currencies (dollar, euro, etc.) are not real wealth either. People think they're rich when they have dollars but they don't own any durable goods. Cryptos are no different. Yes, but the market value of real currencies is not suspended in a vacuum. If central banks do their job well, they create the amount of money that suits the needs of the economy. This amounts to guaranteeing a certain convertibility of the currency into real wealth. Real currencies, if properly managed, are indirectly backed by real wealth. The same is not true for cryptos. There is no central bank, there is no institution or rule that guarantees their convertibility into real wealth.
Cryptos are similar to lottery tickets. As the chances of winning are not zero, financial theory assigns them a non-zero value, which justifies their price. - No. They are lottery tickets. We do not know the probabilities of gains but we know that they lead to very low expected values, compared to expenses, because cryptos are not a zero-sum game. They are highly overvalued lottery tickets, hence very bad bets. Players will on average lose almost everything they bet. According to financial theory, the value of cryptos is therefore almost equal to zero.
When the winners gain everything lost by the losers, it is a zero-sum game. But cryptos are not a zero-sum game. The losers must pay the winners plus the energy bill. For a minority of winners, the speculators who have become rich and who will have sold before the fall, there will be an immense majority of losers, all the savers who will have lost their savings for more than a trillion dollars. It is one of the biggest scams in the history of finance. The scammers are the promoters of cryptos.
Cryptos are like American options. The exercise value of the option is the resale price of a crypto. It's like a lottery ticket, except that there is a draw every second, and we can choose whether we get our gains immediately, or if we prefer to wait for the following draws, hoping for a higher gain. Therefore we have to evaluate a crypto as we evaluate an American option, taking into account the probabilities of gain. What are the odds of winning for cryptos? Nobody can know them because the decisions of speculators are unpredictable, even in a statistical way. Past averages are not necessarily indicative of future averages. On the other hand, we know that the expected gain is very small compared to the initial bets, because most of the players' bets are spent to waste energy.
Finance has a raison d'être when we finance the production of real wealth. Promoters of cryptos should not be allowed to present them as an investment to savers, because they do not finance any production of real wealth, only their waste. This is not investment, just a gambling game where bettors will eventually lose their entire bet. It is not productive finance, only vicious finance, as if we could all get rich by indulging in laziness and greed, by laughing at work and by despising it. Crypto buyers will get the punishment they deserve. They are collectively condemned to ruin and opprobrium, because they believe they are getting rich without producing or possessing any wealth.
The collapse of the crypto system will not be the ruin of crypto savers, because they are already ruined, because they think they are rich without owning anything. The collapse of the system will be the cessation of their ruin, because they will stop further ruining themselves, and ruining us at the same time, wasting natural resources. The longer the system lasts, the more crypto savers will ruin themselves and us.
Cryptos are a huge waste of energy. We need energy to live, but we spend so much of it that we destroy the planet. Any wasted energy accelerates our self-destruction, and the destruction of almost all living things. It's so fast that we are not sure that our children will have enough water and food to survive. Why such self-destruction? Why waste all that energy for nothing? Crypto producers are paid in cryptos and they get richer as a result. These horrible polluters that are the crypto factories are paid with cryptos. All the energy wasted creating cryptos has never really been paid for by anyone, because it has been paid for by creating fake money. The crypto system is destroying the planet to fuel speculation in counterfeit money. Finally, after the collapse of the system, the energy bill will be paid, by all those who have lost their savings in this scam. This is like paying an electricity bill late.
The future of cryptos is predictable, because the system is doomed to collapse, but the time frame is unpredictable, because it depends on buyer behaviors and the price of electricity. If the cost of producing a crypto (mainly the cost of wasted electricity) is higher than its market price, cryptos producers lose money if they don't turn off their computers. Crypto factories will continue to waste electricity only if the price of cryptos on the market is high enough to offset the price of electricity supplied to them. The system can crash overnight because crypto prices often yo-yo. It will collapse if these prices fall below production costs. (In this calculation, we ignored the existence of transaction fees paid to crypto producers, because they are usually negligible compared to the electricity costs of each transaction.)
Some figures (source: blockchair.com, 24 April 2023):
Price of one bitcoin: 27316 USD (US Dollars)
Number of transactions in bitcoins per second (average over the last 24 hours): 4.53
Average transaction fee: 1.07 USD
Bitcoin producers produce and receive 6.25 bitcoins, so 6.25x27316=170725 USD every ten minutes or so to process an average of 4.53x600=2718 transactions. They are therefore paid on average more than 60 USD to register a single transaction on the bitcoin ledger (170725/2718=62.81). They are very expensive accountants.
Crypto buyers, you are destroying the planet. When you speculate, you pay for the pollution and for the enrichment of the polluters. Most of you will get the punishment you deserve, you will be ruined, because you have to pay the bill for the wasted electricity.
When we are aware of this appalling waste of a precious good, electricity, there is reason to despair of human beings. If we're a little intelligent, maybe there's still hope. But with such foolishness, is there hope?
There is a speculative bubble when speculators speculate on speculation. They anticipate a rise caused by speculation. It is always a speculation on human stupidity, on the capacity of human beings to lose money when they think they are gaining it. Much of the history of finance is the history of the repetition of this foolishness, as if human beings never learned the lessons of the past (Kindleberger, Mania, panics, and crashes: a history of financial crises, 1978). Crypto speculation is even more stupid than ordinary speculation. It is a speculation not only about speculation, but also about the ability of human beings to waste huge amounts of energy. We can interpret the price of cryptos as an anticipation of the perseverance of human beings in their appalling foolishness.
For today's children to have a future, we have to prepare for it, we have to work hard, and for that we have to be well financed. But crypto promoters and buyers scoff at productive finance, they despise good work, they put finance at the service of vice, greed, laziness, complacency in ignorance and foolishness, instead of preparing for the future of our children.
A final argument (too serious for imbeciles who don't think. It's an argument for adults who can think responsibly, not for imbeciles so imbecile that they're not ashamed to promote cryptos): which is better, regulated finance or unregulated finance? Finance is to sell wealth that does not yet exist. We sell promises of wealth. There is always counterparty risk. If you entrust your money to a counterparty who promises you future profits, you run the risk that the counterparty will not honor his commitments. If finance is not regulated, it is the door open to all scams. Those who believe that regulations are a brake on growth are delusional, because we don't make prosperity with crooks. Who can protect us from scammers other than the courts? If there are no laws to protect us from crooks who sell wealth that doesn't exist and never will, how do we become prosperous? The companies that handle crypto savers' money are fake banks, shadow banks, ghost banks, banks that aren't really banks except in their customers' fantasies, because they're unregulated. The regulation of the banking system protects savers. In a regulated bank, their savings are secure (in the United States, savings in a regulated bank are insured up to $250,000). In a shadow bank, savings do not benefit from any security. If the shadow bank fails, savers lose everything. A well-regulated banking system is not a brake on growth, quite the contrary, because it is a way of reducing risks. Proper regulation of the banking system helps to reduce counterparty risk to a minimum. The more we know how to reduce risks, the better we finance, and the better we prepare for the future and the prosperity of the children of the planet. Crypto proponents promised us that with crypto we wouldn't need banks anymore, as if cryptos were an anarchist way to get rid of banks and Wall Street, as if cryptos gave us the means to play Main Street against Wall Street, as if ordinary savers (Main Street) could finally do without Wall Street. But it's a fantasy. The truth is very different. Cryptos do not eliminate the banking system, they only substitute fake banks, run by crooks, for real banks, which must obey the law (Paul Krugman, Is This the End Game for Crypto?, New York Times, Nov 17, 2022).
Wikipedia:
Bitcoin has been characterized as a speculative bubble by eight winners of the Nobel Memorial Prize in Economic Sciences: Paul Krugman, Robert J. Shiller, Joseph Stiglitz, Richard Thaler, James Heckman, Thomas Sargent, Angus Deaton,and Oliver Hart; and by central bank officials including Alan Greenspan, Agustín Carstens, Vítor Constâncio, and Nout Wellink.
The investors Warren Buffett and George Soros have respectively characterized it as a "mirage" and a "bubble"; while the business executives Jack Ma and J.P. Morgan Chase CEO Jamie Dimon have called it a "bubble" and a "fraud", respectively, although Jamie Dimon later said he regretted dubbing Bitcoin a fraud. BlackRock CEO Laurence D. Fink called Bitcoin an "index of money laundering".
In June 2022, Bill Gates said that cryptocurrencies are "100% based on greater fool theory".