In 2018, a Surat-based builder wrote to the Gujarat government to report that he had been extorted crores of bitcoins. On investigation, the builder himself turned out to be an extortionist. This bitcoin scam of Gujarat became very popular. More than one crypto currency scam happened in Gujarat. Divyesh Darji who cheated people through Bitconnect.com was also from Surat. India’s Amit Bharadwaj, whose name speaks as the world’s biggest crypto Ponzi schemer in the Gain Bitcoin case, has made people angry, he also died due to ill health. We have to talk about crypto currency i.e. digital currency because of all these scams, ever since people came to know about crypto, new crypto currencies have come and gone in the market.
Bitcoin is the original crypto currency. Bitcoin prices have dropped 75 percent from their original price in the past year. Although this has not only happened with Bitcoin, the prices of many other cryptocurrencies have hit rock bottom. At one time Bitcoin was considered a currency as valuable as or better than any other asset. At present the situation is that most of the investors are sitting silently taking losses.
Sam Bankman Fried’s name is not new to those in the crypto currency world. He founded FTX.COM which is a major crypto currency exchange – a platform where people can trade their crypto currencies and also store their currencies. The 32 billion dollar crypto exchange company, the second largest in the world, evaporated overnight. Irregularities in financial transactions, scams of customers buying their own company’s cryptocurrencies with their deposits exposed their polls.
Once compared to the likes of Warren Buffett, Sam is on the verge of bankruptcy. Chetan Bhagat, who has been a student of management, commented about crypto that something like crypto-communism talks about giving power to the people through decentralization but in the end the power rests with the few. The digital ledger of crypto-currencies – transactions on the blockchain – has become so confusing that the lines between who is a broker, which bank, what is a commodity and what is a collectible have become blurred. A Ponzi scheme has only one logic – make money as long as it makes money.
Against FTX, its competitor Changpeng Shao has locked horns and the battle is on. But retail buyers who invest in crypto have a different pain. He has invested his future fortune in name crypto and the crash in the crypto currency market has left his chest boarded. The reason retail investors invest is temptation. When any asset bubble is inflating, unexpected returns can tempt bullies. When the global level of liquidity is decreasing, the risk takers in the market will also decrease and it will have a negative impact on the digital currency market as well.
Crypto is ultimately a digital token used for digital payment systems. Its specialty is that it is not bank dependent and transactions are done directly between people. Crypto-enthusiasts have had fun bypassing regulation, banks and government controls, but they have forgotten what determines the value of a currency. The value of the rupee is determined by the Indian government, while the value of the dollar is determined by the American government based on the strength of the military. Cryptocurrencies have no such support.
There are also people who have become billionaires because of crypto because then people have faith in crypto as if they were in a cult leader or a cult. The crypto bubble has finally burst, this time due to FTX and there will surely be fewer people jumping into crypto now. According to those who advise safety and calculated risk in financial investments, crypto is not an investment, should not fall into it. Quick money can never be made and there is nothing wrong with the old ways of making money as it gives us an assurance and guarantee. Most fraud occurs where there is regulation and government free trade.
Crypto picked up speed during the pandemic. In these circumstances, the policy rules regarding it have not been properly formulated yet. People who got over-excited and fell into buying and selling crypto did not yet know the risks associated with it. If the bank goes bankrupt, the government will help, but in the case of crypto, there is no such back-up or support system. Hacks cannot be reversed or misplaced funds recovered by calling customer service. Crypto exchanges will also not receive a government bail-out. Thus, many crypto projects have been pushed into the well of death, but FTX’s downfall is striking. The entire crypto industry has come under suspicion following the bankman’s charges. FTX’s fall comes at a time when tech stocks have been battered.
Companies like Amazon, Twitter, and Meta have called for layoffs. Also, the interest rates of tech companies are not such that they can borrow money to sustain economic viability. The surge in the last 2 years due to the pandemic is subsiding. Currently, interest rates are also high which has made companies’ valuations and capital access daunting. A liquidity crisis has a direct impact on the cryptocurrency world. Crypto entrants have to wonder if they should rely on new, unproven and unregulated assets for their retirement plans. In this crypto world there are assets that are not real.
By the way:
Recently Berkshire Hathaway Vice Chairman Charlie Munger in an interview recently slammed cryptocurrencies and crypto currency holders, saying that Bitcoin is like child prostitution. Crypto is considered hot so everyone jumps into it. He mentioned the founder bankman of FTX and said that these people are promoting the decline of civilization. Munger’s disdain for Yenken-like people who would do anything to increase their wealth was evident in this conversation. He insists that crypto is not a real asset and that the crypto industry, according to him, is half a scam and half an illusion. Warren Buffett said about crypto that he would never buy crypto currency himself because he would end up selling it to someone else because it would have no other use.