(Ross Clark’s article from the SPECTATOR on 09 May 2022.)
Emmanuel Macron's government has now announced that
it has invited Binance, a crypto exchange site, to set up a European HQ in
Paris. You have to ask: has Macron leapt on a bandwagon which has already
started to lose its wheels?
The warning sign for cryptocurrencies is not so much that they have crashed – Bitcoin is down 50 per cent from its peak last November – but that they have become boring. Bitcoin has suffered many a crash before, yet bottom-feeders quickly rushed into the market and sent the price rebounding.
This time around
there is little sign of any enthusiastic speculation. On the contrary, a brief
rally in March fizzled out as quickly as it had begun. Bitcoin now looks set to
plunge below its previous peak of 31,776 reached last July.
Many thought that Bitcoin and other cryptocurrencies
could turn out to be a hedge against inflation. Those hopes have been dashed.
While most currencies have been devaluing against real-world assets,
cryptocurrencies have been falling in value faster.
As for the other
long-term incentive to hold Bitcoin – that it might provide a stable wealth
store from the prying eyes of government – that started to decay a while ago as
governments got better at tracking down cryptocurrencies.
So cryptocurrencies are no longer making anyone rapid fortunes, are no longer protecting against inflation, and governments are working out how to find them. What exactly is the attraction?
They are clearly
little more than a pyramid scheme: (Ponzi) machines for redistributing wealth
from players who are late into the gold rush to those who were early. And like
all other pyramid schemes, they have a brief and finite life. Many of these new
get-rich-quick schemes – like NFTs – have already come and gone.
Cryptocurrencies
face not so much a rapid crash as a slide into nothingness. That a
cryptocurrency exchange should want to take shelter in Macron's France, which
is bound to end up regulating it to death, is the biggest ‘sell’ sign yet.
(Ponzi schemes and pyramid schemes are often confused with one another; however, each comes with a distinctly different structure and mode of operation. Ponzi schemes are outright frauds, while pyramid schemes may or may not be part of a legitimate business opportunity.
The major similarity between Ponzi schemes and
pyramid schemes is that both require a continual flow of new investors in order
to be sustained; once the flow of new investors begins to dry up, the scheme
collapses.)