Bitcoin ‘greatest scam in history’
THE former chief executive of PayPal has slammed bitcoin as the "greatest scam in history" and a "colossal pump-and-dump scheme".
"In a pump-and-dump game, promoters 'pump' up the price of a security creating a speculative frenzy, then 'dump' some of their holdings at artificially high prices. And some cryptocurrencies are pure frauds. Ernst & Young estimates that 10 per cent of the money raised for initial coin offerings [ICOs] has been stolen."
Mr Harris joins a long list of crypto-naysayers from the traditional financial community, including real-life Wolf of Wall Street Jordan Belfort, who has also described cryptocurrencies as "pump-and-dump" schemes.
Earlier this month, the head of German cryptocurrency start-up Savedroid, Yassin Hankir, sparked fears he had run off with $US50 million of investors' money after the website was taken down and replaced with a South Park meme reading: "Aannd it's gone."
Mr Hankir later tweeted a photo of himself on a beach holding a beer, with the words, "Thanks guys! Over and out ...".
The move sparked flashbacks to Prodeum, another "alt-coin" ICO that duped investors, replacing its website with a blank website containing only the word "penis".
After being tracked down in Egypt by a cryptocurrency journalist, Mr Hankir claimed the move was actually a publicity stunt to call attention to the serious problem of ICO scams - although investors were less than convinced.
According to Mr Harris, the losers in the cryptocurrency space were the "ill-informed buyers caught up in the spiral of greed".
"The result is a massive transfer of wealth from ordinary families to internet promoters," he wrote.
"And 'massive' is a massive understatement - 1500 different cryptocurrencies now register over $US300 billion of 'value'. It helps to understand that a bitcoin has no value at all."
Mr Harris, the founder of wealth management company Personal Capital Corporation, argued bitcoin had no value either as a means of payment or a store of value - due to its extreme volatility, high fees and long transaction processing times - or a thing in itself.
"A bitcoin has no intrinsic value," he said.
"It only has value if people think other people will buy it for a higher price - the Greater Fool theory. In what rational universe could someone simply issue electronic scrip - or just announce that they intend to - and create, out of the blue, billions of dollars of value? It makes no sense.
"For the vast majority of uses, bitcoin has no role. Dollars, pounds, euros, yen and renminbi are better means of payment, stores of value and things in themselves. Cryptocurrency is best-suited for one use: criminal activity."
After skyrocketing in price by more than 900 per cent last year in an investing "mania", bitcoin crashed by more than 65 per cent from its December high of just under $US20,000. The cryptocurrency has regained some ground over the past few weeks to trade at around $US9500 at the time of writing.
In a research note earlier this month, investment bank Barclays likened bitcoin's wild price rise and subsequent crash to the spread of an infectious disease which peters out as more people become "immune", just like flu season.