Former NYSE Vice President: Bitcoin is a Ponzi Scheme

At the beginning of 2017, Bitcoin, Turkish Lira and Mexican Peso experienced a series of shocking “diving”. Bitcoin suffered the most, rising 40% in the first four trading days of the year, and then crashed 40% again in just one week.

Why are there such ups and downs? Is it due to the strong control of regulatory authorities? Or is it caused by the Bitcoin trading mechanism?

Is Bitcoin another Ponzi scheme?

"Bitcoin regulation is free, so Bitcoin itself has no innovation and is highly volatile. It is completely a casino because it is completely determined by supply and demand and has no real value itself." Regarding the Bitcoin market, Georges Ugeux, former vice president of the New York Stock Exchange, made the above statement in an exclusive interview with Wall Street Journal.

In his new book, The Betrayal of Finance, Udo specifically proposed the view that "Bitcoin is another Ponzi scheme": Bitcoin has never been a currency. Although it has the functions of a payment tool and a unit of account, it lacks a key element of currency - a means of storage. He pointed out the four major inherent deficiencies of Bitcoin:

The owner and founder of the entire Bitcoin market is being accused of fraud

Several money laundering cases involving Bitcoin have been tried in US courts

Bitcoin’s use as a means of payment is extremely limited

Bitcoin's success highlights regulators' failures in transparency and currency regulation

Regarding the regulatory mechanism of Bitcoin, Udo told Wall Street Journal, "The IMF, the settlement institutions of global banks and the central banks of various countries need to reach a consensus on the regulation of Bitcoin. They need to know what Bitcoin is and where the risks are. In my opinion, it (Bitcoin) should be regulated like stocks. We need to know who is buying and who is selling. The market should be transparent and you can track potential manipulation."

The Fed is stupid

Regarding the regulation of Bitcoin in the United States, Udo "had a lot of complaints" about the Federal Reserve. He told Wall Street Journal that the Federal Reserve's regulation of Bitcoin is "stupid". The Federal Reserve always believes that Bitcoin is not an ordinary currency and it is impossible to develop a system, so it does not need regulation.

"If (the Federal Reserve) starts to suppress the foreign exchange market, it is better to suppress the Bitcoin market. I believe that it is a mechanism that can enable many people to have wealth, and many people will be manipulated and fooled. The US government is very active. We believe that Bitcoin is one of the largest channels for money laundering, and those who master the methods of money laundering 'control people' because of this mechanism, but from a regulatory perspective, this needs to be controlled." Udo told Wall Street Journal.

Who is influencing the Bitcoin market?

Starting from January 11, China's regulatory authorities have entered Bitcoin trading platforms such as Huobi, OKCoin, and Bitcoin China, and met with industry insiders to discuss issues related to third-party Bitcoin custody platforms.

So, what are the fundamental factors that affect the Bitcoin market? An analyst from Huobi.com told Wall Street that the supply and demand relationship directly affects the price of Bitcoin, and behind this is people's trust in the principles of Bitcoin and decentralized networks. In areas where there is a lack of government credit, the demand for Bitcoin will increase, which will also determine the price of Bitcoin. The mining cost of miners is a dynamic value and is not enough to completely determine the fundamentals of Bitcoin prices.

Other industry analysts pointed out that some investors used Bitcoin as a tool to hedge against the weakening of the RMB, which led to funds flowing into Bitcoin and indirectly caused the price surge in the first few days of the year.