Best of the Week
Most Popular
1.Stocks Bear Market Apocalypse Imminent Crash Gets Nuked Again - Nadeem_Walayat
2.Gold And Silver – A Reality Check - Michael_Noonan
3.The Killer Ape, Human Evolution, Artificial Intelligence and Extinction End Game - Nadeem_Walayat
4.Stock Market S&P 500 Volatility-Based Price Probability Range - Richard_Shaw
5.A Stocks Bear Market Is Now More Likely Than Not - Richard_Shaw
6.Money Supply and the Fed’s Serious Inflation Risks - Zeal_LLC
7.More Selling for Stock Market, Gold? - Brad_Gudgeon
8.Gold, Silver Precious Metals: a Critical Week Ahead - Rambus_Chartology
9.Gold Price Change in Character - Gary_Savage
10.Advice for Biotech Investors: 'Hold Your Powder' 'til Winter - TLSReport
Last 5 days
Stock Market Rally May be Broken - 9th Oct 15
Gold Stocks Major Breakout - 9th Oct 15
Contrarian Investing - Being the 10th Man - 9th Oct 15
U.S. Can Expect Recession in 1-3 Years - 9th Oct 15
The Greater Economic Depression Deep State - 9th Oct 15
Financial Markets Calm Before the Storm? - 9th Oct 15
Stock Market History Calling, Says Performance will be Crappy for Another ~10 years! - 9th Oct 15
Why This Feels Like an Economic Depression for Most People - 9th Oct 15
Dr Copper Back from the Dead - Time to Buy or Blink - 8th Oct 15
Glencore Rout Blamed on Short Sellers Playing With CDS - 8th Oct 15
The Real Reason for the Refugee Crisis You Won’t Hear About in the Media - 8th Oct 15
US Stocks: The [Trend]Line Between Bull and Bear Market - 8th Oct 15
Bundesbank “Reassures” Re. Gold Bullion Reserves as Deutsche Bank Shocks With €6 Billion Loss Warning - 8th Oct 15
How Our Aversion To Change Leads Us Into Danger - 8th Oct 15
Moving Stem Cell Research Forward: Bernie Siegel of the Genetics Policy Institute - 8th Oct 15
Stock Market VERY IMPORTANT Turn Date - 7th Oct 15
The 5th Convergence…An Economic & Financial Superstorm That Will Devastate America - 7th Oct 15
Summers Grades Janet Yellen's Fed Performance 'Incomplete' - 7th Oct 15
Gold Versus Central Banks Paper Ponzi - 7th Oct 15
QE3 is Over Get Ready for QE4 - 7th Oct 15
How to Profit from Government Mandates in Biofuels - 7th Oct 15
A Key Oil Price Trend That Everyone Is Missing - 6th Oct 15
Stock Market Turn Appears to Have Been Made - 6th Oct 15
Designing a Dividend Growth Portfolio for a Specific Retirement Yield Objective - 6th Oct 15
Peter Schiff Predicts Gold Price Breakout - Video - 6th Oct 15
Theresa May Declares War on Immigration - Conference Speech Full Transcript - 6th Oct 15
Is Russia Plotting To Bring Down OPEC? - 6th Oct 15
Target Date Funds As Aid In Retirement Investment Portfolio Design - 6th Oct 15
Stocks Bear Market Apocalypse Imminent Crash Gets Nuked Again - 6th Oct 15
Redesigning Internet and Facebook to Explore Their Full Potentialities... - 5th Oct 15
Nightshades Curb Your Enthusiasm - 5th Oct 15
U.S. Recession Watch, High-Yield – Rising Defaults - 5th Oct 15
The Social Challenge to Find Humanity in Capitalism - 5th Oct 15
Fed Interest Rate Hike: "I don't care. It doesn't really make much of a difference" - 5th Oct 15
Gold Rose 2.2%, Silver Surged 5.4% After Poor Jobs Number On Friday - 5th Oct 15
Gold, Silver Precious Metals: a Critical Week Ahead - 5th Oct 15
Stock Market Correction Still in Force - 5th Oct 15
Gold Price Change in Character - 5th Oct 15
Putin’s Blitz Leaves Washington Rankled and Confused - 4th Oct 15
More Selling for Stock Market, Gold? - 4th Oct 15

Free Instant Analysis

Free Instant Technical Analysis

Market Oracle FREE Newsletter

Bitcoin Price Crash Towards Zero? The Ponzi Scheme Bubble Plays Out as Designed

Currencies / Bitcoin Dec 07, 2013 - 02:27 PM GMT

By: Nadeem_Walayat


The Bitcoin price last traded at USD 790 (this morning) which represents a 37% price crash against its trading high of 1242, vaporising the wild dreams of just a few days ago where some reported that the virtual money could be destined to go as high as 1 million! Whilst never realising the difference between what is virtual and what is real, instead in large part bitcoin pumper's remain in denial as many have been seduced by the golden coin image to imagine that bitcoins and gold are the same or similar when the reality is the exact opposite. Bitcoins is fairy dust, it is perceived as being very valuable but a small gust of reality is enough to make it disappear.

Bitcoins is DESIGNED to play out as a ponzi scheme bubble to enrich those that created it as they mined over a million bitcoins (current 12.1mln bitcoins) relatively easily (initially low processing power required), with future supply increasingly limited as much greater processing power is required to mine more blocks which coupled with the media frenzy has helped push up the price which the designers and early adopters can offload into and onto unsuspecting fools. This is a ponzi scheme where only the designers and initial miners win hugely, that I suspect will lead to criminal prosecutions.

Meanwhile, over the past 24 hours the blogosfear, mainstream press and the sales men have been busy writing reams of commentary on the bitcoin crash AFTER the event, AFTER the bitcoin crash, and many can be seen floundering like fish out of water as to what direction bitcoins are likely to take going forward as they delve into double speak i.e. implying that the price could continue falling or then again might be a great opportunity to buy, the broadcast news is full of such double speak by the media whores that populate the likes of CNBC, you know who they are!

So whilst the media was painting a picture of bitcoins soaring into the stratosphere, I made it clear in my article of just over a week ago as the bitcoin price homed in on its 1242 high as to why bitcoins were a ponzi scheme destined to collapse and what bitcoin holders should do IMMEDIATLEY.

29 Nov 2013 - Bank of England UK Housing Market Bubble Panic is Mark Carney Playing Game of Thrones

As was the case for the original Tulip Mania, following the bursting of the bubble Bitcoins will soon be forgotten and so will the craze for all peer to peer i-currencies, as the bottom line is that bitcoins never matched the hype for transactions are NOT anonymous and it IS heavily manipulated by a handful of mining pools so is not decentralised as today ordinary people cannot muster the processing power required to mine for bitcoins.

The bottom line is that bitcoins are a pyramid ponzi scheme where those who got in early win, whilst everyone else loses. If you own bitcoins then you should get out IMMEDIATELY!

Here are some mainstream media excerpts of the bitcoin craziness in the run up to the crash.

The Guardian - Is Bitcoin about to change the world?

If you want to buy drugs or guns anonymously online, virtual currency Bitcoin is better than hard cash. Canny speculators have been hoarding it like digital gold. Now the world's leading bankers are even talking about as a rival for real money.

Yahoo Finance - Bitcoin is Heading Toward a New High — and It Could Go to $1 Million

People keep describing this price behavior as "crazy" and "insane," but it's actually not that surprising. Earlier this spring, when Bitcoin was trading at about $90, I "raised my Bitcoin target" to $400. This was an inside joke that referenced an old price target of mine. I don't actually have a Bitcoin target. But I was getting at a more profound point: $400 is a perfectly reasonable target for Bitcoin. As is $1,000. As is $10,000 or $100,000 or $1 million. - Bitcoin Mints Its First Billionaire: Its Inventor, Satoshi Nakamoto

In January of 2009, Satoshi started mining the first crop of bitcoin, creating what is known as the “genesis block.” By year-end, over 32,000 blocks had been added to this original block, producing a total of 1,624,250 bitcoins. Since all transactions are public on the blockchain, we know that only a quarter of those bitcoins have ever changed hands, which means Satoshi is believed to be sitting on a stash of roughly one million bitcoins. With Bitcoin surging past $1000, that stash is worth about $1.1 billion.

Wednesdays price crash was followed early Thursday with my next article that laid out a forecast of how the bitcoin crash would play out over the coming days as the price at the time had recovered strongly from its initial crash to 900 to stand at 1074 at the time.

05 Dec 2013 - Bitcoin Mania Bubble Bursts, China Triggers Price Crash Start, Technical Forecast

What's Next for Bitcoins

A quick technical review of the charts implies that a double top pattern is being formed which is a warning that the bounce from the neckline is not something that bitcoin holders should put much hope into for the price is likely to reverse within days to break the neckline and retrace all the way down to at least 500 (current 1074), which is more than a 50% drop of the last price and a 60% drop from the high.

Longer term my view remains that bitcoins could lose as much as 99% of their value, so following a 60% crash, don't be seduced into the buying opportunity sales pitch that you will hear much about, no matter how hard the price bounces following the crash it will as the bitcoin longer term history illustrates just mark the initial phase of a prolonged price collapse towards 1/99th of its trading high or about 15, at which point even I would consider a speculative buy.

The bitcoin stepped crash with much volatility continues to play out not just towards my technical target of 500 but eventually towards virtually zero as represented by my longer-term objective of just 15, that is 1/99th of its trading high. So understand this that the nightmare for those who continue to hold onto bitcoins is only just beginning, yes the price has crashed by 37%, but it is still stands 37% above its technical target of 500 and has the potential for a 96% loss of its current value should the target of 15 be realised, so this is NOT the time to hold on hopes of recovering back towards the highs as the loss of value sustained could literally be TOTAL! A lesson that all market traders have to learn else they will go bankrupt holding on for price recoveries that always become more distant with each stomach churning lurch to the downside.

For more analysis of why bitcoins is crashing do read my two recent articles on bitcoins

Charts courtesy of

Source and Comments:

Nadeem Walayat

Copyright © 2005-2013 (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of four ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series.that can be downloaded for Free.

The Stocks Stealth Bull Market 2013 and Beyond EbookThe Stocks Stealth Bull Market Update 2011 EbookThe Interest Rate Mega-Trend EbookThe Inflation Mega-trend Ebook

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 600 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2015 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


11 Dec 13, 10:30
fix or tracker

Hi Nadeem,

you suggested to fix our mortgages immediately.

Would you recommend to stay on 5 year tracker or 5 year fixed products? One has to pay around 0.3% premium for fix.

Thank you in advance

12 Dec 13, 01:55
Mortgage Fix or Tracker

If it where me I would fix.

That way I can get on with making money rather wasting time watching the tracker osciliate around interest rates.

But do remember I am ANTI-DEBT. Personally I would always go without then borrow a penny, unless its for stoozing :)



27 Dec 13, 13:25
bitcoin challange

Dear Nadeem

A rare occasion where I think you've got it wrong. Care to take my $100 challenge?

Happy Christmas!

Paul Mathers

27 Dec 13, 13:54
Bitcoin gamble


I don't gamble I take calculated risks, I said what i would do which is to buy bitcoins at 15. That is the risk reward that would get me a positiona and that is what Market Oracle is all about, not gambling.

If bitcoin never gets anywhere near 15 then I have no position, no loss, but if I take your bet then I could lose $100. The risk vs reward is bad. It's a gamble!

To trade the price collapse I would have shorted it from above 1100 and then moved the stop to break-even and then locked in a small profit, and then cashed in on the plunge- that's how I would trade bitcoins IF it had a tradeble tight spread market, that's how I traded past crashes such as stocks in 1987 - not take a 50/50 MASSIVE SPREAD bet of $2000 or $15 for $100 that is a bad behaviour pattern to imprint.

Ofcourse bitcoins is a ponzi scheme, I could create my own ! and make it even more enticing to investors as it would be backed by the MO site ! But I won't for obvious reasons.

And ofcourse the bitcoin market is manipuated by a few small pools THAT IS WHAT HAPPENS TO ALL MARKETS!!!! ALL MARKETS ARE MANIPULATED! Teh first step to understanding where markets are going to go is to understand this fundemental fact that all markets are manipulated!

I understand it is very easy to get sucked into bubbles afterall that is what happened during the dot com bubble, but people buying at $900 are going to regret buying big time.

All the Best


08 Jan 14, 17:37
bitcoin challange

It was more a friendly wager Nadeem.

The fact that you can create a crypto currency yourself does not make it a Ponzi scheme. Confidence in your coins only comes by them being operated by a democratic network viz-a-viz bitcoin.

I still maintain that the greatest ponzi scheme of all is fiat currency as explained on my blog. This has recently been supported by reports in the newspapers such as


Paul M

08 Jan 14, 21:14
Fiat Currency

Yes, fiat currency is a ponzi scheme the cost of which manifests itself in inflation and ultimately hyperinflationary collapse that ALL currencies are trending towards.

To imagine bitcoin is any different is a huge mistake. It IS a PONZI just as are all fiat currencies.

For something to be none ponzi it needs to be backed by something physical that cannot be easily printed such as gold or housing stock.



Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Biggest Debt Bomb in History