Best of the Week
Most Popular
1.Stock Market Crash and Recession Indicator Warning: Extreme Danger Ahead - Harry_Dent
2. Is This How World War III Begins, In Almost Complete Silence? - Jeff_Berwick
3.Trump Wins 2nd Presidential Debate, Betfair Betting Markets Odds Bounce - Nadeem_Walayat
4.Why Krugman, Roubini, Rogoff And Buffett Dislike Gold - GoldCore
5.End of SPX Stock Market Correction Nears - Tony_Caldaro
6.Get Ready for the Future - Exponential Machine Intelligence Mega-trend towards Singularity - Nadeem_Walayat
7.US Housing Market Bubble II – It’s Happening Again! - Andy_Sutton
8.FTSE BrExit Stock Market Panic Crash Resolves towards New All Time Highs - Nadeem_Walayat
9.Can Trump Still Win Despite Opinion Polls, Bookmakers and Pundits all Saying Hillary has Won? - Nadeem_Walayat
10.Gold’s, Miners’ Stops Run - Zeal_LLC
Last 7 days
The Next Big Shoe to Drop – Student Loans - 27th Oct 16
The Twists and Turns of the Greenback - 27th Oct 16
Obamacare Is Draining Our Financial Reserves - 27th Oct 16
Brexit II: Is Donald Trump a False Flag? - 27th Oct 16
“Chindia” Buying Gold on Dips, 20% Corrections Are “Non Events” - 27th Oct 16
4 Incredible Market Forecasts You Have to See to Believe - 26th Oct 16
Silver Prices in an Exponential Financial System - 26th Oct 16
Rigged Election: Hillary and Trump Caught Partying Like BFF’s With Kissinger at Jesuit Gala - 26th Oct 16
The Current Message of Yield Curves: Inflation or Deflation? - 25th Oct 16
Broken Central Banks: 4 Quick Pix - 25th Oct 16
Government Stimulus is an Oxymoron, Debt to GDP - 25th Oct 16
Where Will Crude Oil Price Head Next? - 25th Oct 16
Diamonds in the Gold and Silver Mining Stocks - 25th Oct 16
Trump’s Gettysburg Address against the New World - 25th Oct 16
This Past Week in Gold - 24th Oct 16
Can Gold Continue To Rise, Since The Usd Is Moving Higher Too? - 24th Oct 16
Why are Americans Avoiding the Stock Markets; Fear or Lack of Money? - 24th Oct 16
The US Is NOT a Low-Tax Jurisdiction - 24th Oct 16
Stocks, Crude Oil and EURUSD Trend Forecasts - 24th Oct 16
Stock Market Another Month to Go? - 24th Oct 16
Large Sell-off in Stock Market Looming - 24th Oct 16
Ungovernability - 24th Oct 16
Stock Market Boredom Before The Storm - 24th Oct 16
Establishment Mainstream Media Elite Buys US Election for Hillary Clinton, Time Running Out for Trump - 23rd Oct 16
Inflation About To Explode Higher - 22nd Oct 16
Still waiting for SPX uptrend to kick off - 22nd Oct 16
Will a Rising US Dollar Crush Gold’s Fledgling Bull? - 22nd Oct 16
Why The Global Economy Will Disintegrate Rapidly Back to Olduvai Gorge - 22nd Oct 16
GLD Bleeds Out; Weekly Gold Update - 22nd Oct 16
Stock Market Investment Success Through the “Investment Rule of 72” - 21st Oct 16
The Final Bottom in Gold - WHEN - 21st Oct 16
Gold Green Lights Upleg - 21st Oct 16
Demand for US Mints Silver Eagles has ‘Returned with a Vengeance’ - 21st Oct 16
Central Bankers Can't Stop The Death Blow Of The Post US Election Recession - 21st Oct 16
The Fortune at the Bottom of the Pyramid: Golden Opportunity for Frontier Asia - 21st Oct 16
Have You Taken These 4 Simple Steps to Improve Your Trading? - 21st Oct 16
The Stock Market is an Accident Waiting to Happen - 20th Oct 16
It's Rally Time for Gold and Silver Equities - 20th Oct 16
Cashless Society – Risks Posed By The War On Cash - 20th Oct 16
China's insane Housing Market Will Tumble and Crash in 2017 - 20th Oct 16
Donald Trump Bounces Going into 3rd and Final US Presidential Election Debate - 20th Oct 16
Attention Please: Phase Two of the Gold and Silver Train Now leaving the Station. All Aboard? - 19th Oct 16
How to Successfully Trade a Stock Market Crash - Black Monday October 19th 1987 - 19th Oct 16
Tesla, Apple and Uber Push Lithium Prices Even Higher - 18th Oct 16
Silver, Debt, and Deficits – From an Election Year Perspective - 18th Oct 16
UK Property Market: Slow Growth Does Not Equate To Decline - 18th Oct 16
Trump Election Victory is in Your Power - 18th Oct 16
Stock Market More to Come! - 18th Oct 16
This Past Week in Gold and Silver - 17th Oct 16
A Falling Stock Market Cannot Be Allowed - Financial Repression Is Now “In-Play”! - 17th Oct 16
Commodities, Forex and Stock Market Trend Forecasts - 17th Oct 16
Stock Market Crash..or No Crash? - 17th Oct 16
A perspective on risk rally – Risks abound but Stock Market is Confident - 17th Oct 16
Bank of England Blames Brexit for Sterling Drop Inflation, Masks QE Money Printing Cause - 17th Oct 16
From Piety to Pride to Pity, America's Racial Divide - 17th Oct 16

Free Instant Analysis

Free Instant Technical Analysis

Market Oracle FREE Newsletter

The Power of the Wave Principle

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

© 2005-2016 - 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

Catching a Falling Financial Knife