NEW YORK (InsideBitcoins) — Bitcoin may be a demand-driven “bubble,” but it is no Ponzi scheme, says Kaushik Basu, World Bank chief economist and author of ‘Ponzis: The Science and Mystique of a Class of Financial Frauds.’
“Contrary to a widely-held opinion, Bitcoin is not a deliberate Ponzi. And there is little to learn by treating it as such,” Basu writes in the recently released report.
However, Basu says the cryptocurrency has been the subject of broad market speculation.
“One can buy Bitcoin the way one can buy euros and trade freely with others having euros. Trouble started when people began speculating that the value of Bitcoin would rise, thereby raising the demand for Bitcoin and making the value-rise a self-fulfilling prophesy. In other words, what we witnessed recently in the Bitcoin phenomenon fits the standard definition of a speculative bubble,” Basu says.
Basu served as chief economic adviser to the government of India and is currently on leave from Cornell University where he is professor of economics and international studies.
“The main value of Bitcoin may, in retrospect, turn out to be the lessons it offers to central banks on the prospects of electronic currency, and on how to enhance efficiency and cut transactions cost,” Basu concludes.
However, there are a number of fraudulent investing scams that have made headlines in the web lately, raising the question “is bitcoin a ponzi scheme’?
These scams, known as bitcoin trading robots are created by fraudsters who promise investors astronomical profits with little risk if they only invest $250 into their software or more.
They claim that their software operate with smart algorithms that are able to generate profits for investors and buy / sell bitcoin automatically without their intervention, 24/7, generating returns of up to $3,000 per day. Products such as the Bitcoin Loophole scam and the Bitcoin Trader fraud have lured thousands of investors, leading victims to deposit their savings only to lose them in a few minutes.